These days, what people call a “home” can be anything from a mansion to a car parked in a part of the town where they won’t be hassled and can get some sleep.
Homestead laws are generally found in collection laws and apply to any kind of collection action. Some states like Michigan, have a separate set of exemption laws to cover bankruptcy.
Some states are famous for their homestead laws. Florida and Texas, for example are proud of their exemption and that’s why OJ move to Florida when he faced civil fines for his acts that were proven in a civil lawsuit. He was able to keep his mansion in Florida, despite the massive debts against him.
But homestead laws don’t protect just the rich and famous. Colorado has made changes to their homestead law to make sure that everyone’s home, regardless of how humble is protected. ￼
In 2022 Colorado Expanded the Definition of “Dwelling” to include living in your car
Last year, the state of Colorado decided to expand its homestead exemption dwelling to include all kinds of things people live in.
As they put it, “personal property used as a residence” — i.e. living in your car.
So, if you’re living in your car when you file for bankruptcy in Colorado, it’s protected by the homestead exemption, thanks to the new section Colo. Rev. Stat. § 38-41-201.7 that was added in 2022.
But whether or not you live in Colorado, you still may be protected if you live in personal property. Whether or not you own the land that it sits on, you still may be entitled to a homestead protection for your dwelling.
All of this is relatively new in the last 50 years. The law didn’t used to be as fair. Time was only people who had actual physical homes on property they owned were protected by Homestead. Renters had no such protection and people in mobile home parks had no protection because they didn’t on the land the home sits on. They lease the lot and own a home.
Many states expanded their homestead laws to explicitly include mobile homes back in the 1980s. It’s possible that the changes that we’ve seen in Colorado may spread to other states, as more and more people have to live in their cars or a tricked-out van that they park wherever they can.
- H.B. 790: Made various changes to homestead exemptions, including providing that the official schedule of property claimed exempt filed with the United States Bankruptcy Court in a bankruptcy proceeding constitutes a sufficient writing to exempt such real and personal property from creditor process. The bill also provides that a householder may hold exempt from creditor process real or personal property that the householder or his dependent uses as a principal residence not exceeding $25,000 in value.
- Signed into law on March 12, 2020.
But Don’t Worry, the Rich Are Being Protected, Too
Homestead laws aren’t just being expanded to protect the poor. They’re also being expanded to protect the rich.
As people’s property values increase and inflation increases, the homestead laws of yesteryear seem rather inadequate to protect peoples homes and places like California where $700,000 mortgages on $1,3000,000 homes are not uncommon, leaving hundreds of thousnds of dollars of equity exposed to loss in bankruptcy.
As a result many states have increased their homestead limits from amounts below 100,000 to amounts above $100,000 and beyond.
States with unlimited Homesteads
States the Homestead exemption limit is over $1 million
States where the Homestead Exemption is over $500,000
California (selected counties)
States where the Homestead Exemption is over $200,000
States Where the Homestead Exemption Limit is between than $50,000 – $200,000
States Where the Homestead is less than $50,000
Recent State Bankruptcy Exemption Changes Thanks to NACBA:
STATE LEGISLATION 2020-2022
S.B.1099: Signed into law on September 28, 2022. The bill goes into effect January 1, 2023. Highlights include:
- “Ride through” option restored for vehicles (no more repos for failure to reaffirm).
- Homes protected from trustees selling them due to post-petition appreciation where had been fully protected by the homestead exemption on the petition date. Such appreciation will also be exempt.
- Spouses living separate or apart from a non-filing spouse will no longer require a waiver from the non-filing spouse to utilize our alternate set of exemptions (which are usually more favorable for non-homeowners).
- Increases the motor vehicle exemption to $7,500 for both sets of exemptions.
- Creates new exemption fully exempting vehicles converted for use by a disabled debtor, spouse or dependent.
- Creates new exemption for up to an aggregate amount up to $7,500 for accrued or unused vacation pay, sick leave, family leave or wages.
- Creates new exemption for payments from settlement agreements arising from debtor’s employment (e.g. workplace harassment).
- Creates new exemption for alimony, maintenance and support which was not previously included in the set of exemptions which includes the homestead exemption.
- A.B. 1885: increases the homestead exemption in the event of a bankruptcy to $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the year when the judgement debtor claims the exemption. It caps the amount at $600,000 and, beginning in January 2022, adjusts it annually for inflation based on the change in the California Consumer Price Index.
- Signed into law on September 18, 2020.
- S.B. 22-086:
- Increases the homestead exemption from $75,000 to $250,000 if the homestead is occupied as a home by an owner of the home or an owner’s family;
- and from $105,000 to $350,000 if the homestead is occupied as a home by an owner who is elderly or disabled, an owner’s spouse who is elderly or disabled, or an owner’s dependent who is elderly or disabled.
- Homestead exemption covers non-traditional housing;
- Adds exemption for funds reserved for taxes & insurance on some reverse mortgages; and
- keeps exemptions on unemployment & child support even if funds commingled.
- Signed into law on April 7, 2022. Bill takes effect upon Governor’s signature.
- H.B. 6466:
- Raises the homestead exemption to $250,000,
- motor vehicle exemption to $7,000, and
- creates an exemption for the cash surrender value of life insurance policies.
- Signed into law on July 12, 2021.
- H.B. 790: Makes various changes to homestead exemptions, including providing that the official schedule of property claimed exempt filed with the United States Bankruptcy Court in a bankruptcy proceeding constitutes a sufficient writing to exempt such real and personal property from creditor process. The bill also provides that a householder may hold exempt from creditor process real or personal property that the householder or his dependent uses as a principal residence not exceeding $25,000 in value.
- Signed into law on March 12, 2020.
- S.B. 5408: raises the Washington Homestead Exemption to the greater of $125,000 or the county median sale price of a single family home.
- Signed into law on May 12, 2021.