Owning a home is considered the American Dream, but losing that home to foreclosure can turn it into a nightmare. If you decide bankruptcy is best for you, filing for bankruptcy creates what is called an automatic stay. An automatic stay temporarily halts many legal actions, including foreclosure.
In many states, if you file for bankruptcy, you may use a homestead exemption. In the vast majority of states, this applies only to what is known as your domicile. For most people, the domicile is the place where you actually live on a regular basis (however, there are those who formerly resided in one state and intend to return, though they are currently in another state or country for purposes of work, such as military personnel or politicians at the federal level, for instance; the former state is considered the domicile). Vacation homes or commercial property does not apply in these cases. For one exception, see Florida's bankruptcy exemptions. Additionally, some states require that to use the homestead exemption, you must record your homestead at your county filing office.
Many homestead exemptions give a dollar amount indicating how much of your home's equity is considered exempt from debt discharge. The federal exemption amount is $20,200. Depending on the state you're in, you may choose the federal exemptions, or the state exemptions. Note: you cannot mix federal or state exemptions. In some states, property owned jointly by husbands and wives are considered tenancies by the entireties. If you own a homestead under such a condition in an eligible state, that means the property cannot be used to settle or satisfy debts incurred by only one spouse.
This can be somewhat complex and intimidating. Read about bankruptcy and if you have very specific questions about your particular situation, see an attorney before filing. For a list of laws and summaries of bankruptcy exemptions for each state (and the District of Columbia), click here.