Big changes on the homestead exemption front! Effective January 1, 2010, the homestead exemption rose by $25,000 for most people. Depending on a host of factors, your exemption might range anywhere from $75,000 to $175,000.
Boiled to its essence, the amount of the “homestead exemption” is the amount that a judgment creditor would have to PAY YOU from a forced sale of a dwelling.
Forced sales of real property to pay unsecured judgment creditors are rare in a down real estate market as a court won’t give permission if there is insufficient money to pay for the costs of sale, property taxes, superior lien interests AND the value of the available homestead exemption.
The homestead exemption is a very important consideration in a bankruptcy case. Just like a judgment credito r, a trustee in bankruptcy can force the sale of a home if there is enough equity. Where the exemption comes into play is when there is “realizable equity” in a home. In a Chapter 7 bankruptcy case, a trustee is assigned whose job it is to liquidate assets for creditors. However, the trustee does not just sell a person’s home on the fly. Rather, the trustee determines what kind of proceeds could be obtained for distribution to unsecured creditors if a home was hypothetically sold.