New Hampshire's Homestead Act protects a homeowner's primary residence from creditors seeking to settle a debt. Homeowners do not need to ask for protection – the state grants it automatically to cover unsecured debt. Homeowners file for homestead protection when applying for federal bankruptcy.
Homestead Protection Laws
Most states have homestead protection laws to keep property owners from losing their primary place of residence to creditors. A property owner who cannot meet a creditor's demands will still need a place to live after declaring bankruptcy.
These laws allow people to register a portion of their real and personal property as a "homestead," which makes that property off-limits to the majority of creditors. Homestead laws can preserve a family's house, farm and other assets under severe economic conditions.
Property owners turn to homestead laws when filing for bankruptcy. Each state with homestead laws has its own criteria, but typically bases its exemption amount on equity, acreage or both.
How a Homestead Exemption Works in Bankruptcy
Many states allow those filing bankruptcy the ability to protect some or all of their home's equity when filing Chapter 7 bankruptcy. However, the homestead exemption is also helpful in a Chapter 13 bankruptcy proceeding.
Chapter 7 bankruptcy focuses on getting rid of unsecured debt (credit cards are an example of unsecured debt). Chapter 13 bankruptcy allows the debtor to discharge their unsecured debt, while paying secured debts (for example, a home or vehicle.)
Exemptions are different from state to state. For example:
- Some states allow homeowners to exempt their total home equity, no matter how large; others protect only a small portion.
- Some states allow married couples filing bankruptcy jointly to double the homestead exemption amount; others do not.
- Some states require the homeowner to file a homestead declaration to use the homestead exemption in bankruptcy; others do not.
- Many states require homeowners to use the homestead exemption from their state, but others allow them to choose between state and federal homestead exemptions.
Homestead Rule in New Hampshire
The state of New Hampshire defines homestead as a single-family dwelling that a claimant owns or a multi-unit dwelling, the portion of which is owned and used as an individual's primary residence and domicile.
The state defines household income for federal income tax purposes as the total of the adjusted gross income of a claimant and any person at least 18 years old who is a member of their household or resides in the homestead.
It defines the head of a household as a person who files their federal income tax return as such, or two or more adults jointly sharing a homestead. This definition does not include adults who share a homestead under a landlord.
New Hampshire Homestead Protections
According to N.H. Rev. Stat. Section 480:1, New Hampshire residents are entitled to up $120,000 in home equity protection or $240,000 in home equity protection for a married couple. Manufactured homes are also covered, but the coverage does not extend to the land if someone else owns it.
New Hampshire lets Homestead Act filers use its exemption system or the federal government's system. This gives them two homestead amounts to choose from, but they cannot combine exemptions.
Federal Exemptions for Homeowners
Under the Federal Homestead Act, homeowners can protect $27,900 of equity in their principal residence. However, the homeowner must live on the property to use this exemption.
According to the federal bankruptcy protection system, exempt residences are houses, condominiums or another type of dwelling property that a person lives in, such as a mobile home. Equity in rental or investment properties is not protected.
Federal Homestead Exemption Domicile Requirement
Federal law restricts homestead exemptions to keep people from shielding their assets by moving to states where unlimited exemptions apply. To use a homestead exemption, a homeowner must have purchased their home at least 40 months before applying for bankruptcy to qualify for their state's homestead exemption.
However, there is an exemption to this rule. If a homeowner sells their home and buys a new one in a new state with its sale proceeds, the time they owned their first home counts toward that 40-month requirement.
Federal law caps homestead exemptions at $189,050 for those who can't satisfy the homestead domicile requirement, despite their state exemption amount. This exemption is also capped at the same amount if the homeowner committed bankruptcy fraud or other crimes.
What a Bankruptcy Trustee Does
When a debtor files for bankruptcy, the court appoints a bankruptcy trustee to administer their case. The trustee reviews the paperwork the debtor filed with the court, including "521 documents," such as bank statements, tax returns, pay stubs and documents regarding their car loan, marital settlement agreement or mortgage agreement.
Individuals filing for bankruptcy must attend a "341 meeting of creditors." During the hearing, the trustee will:
- Place the debtor under oath.
- Verify the debtor's identification and petition accuracy.
- Ask about any item in the debtor's bankruptcy paperwork.
- Ask common questions of everyone in attendance.
- Allow creditors who are present to ask questions.
Chapter 7 Bankruptcy and Homestead Exemption
A Chapter 7 bankruptcy can relieve a debtor of unsecured debts within months. The trustee can sell an individual's nonexempt property (such as cash, securities, a second home or valuable items like a coin or stamp collection) to pay those debts.
When filing Chapter 7 bankruptcy, also known as "straight" or "liquidation" bankruptcy, a debtor must have had no Chapter 7 bankruptcies in the past eight years and must have low income to qualify, calculated by a means test.
The debtor can keep their home in this type of bankruptcy if they do not have home equity. They may also protect their equity using their homestead exemption. It won't be sold – without available equity, there is no available money to distribute to unsecured creditors.
Homestead Exemption in Chapter 13 Bankruptcy
Chapter 13 bankruptcy is for people with regular income who want to pay part or all of their debts over time in installments and discharge some unpaid debts. A debtor must file their plan with the court to repay their creditors part or all of what they owe, typically with their future earnings. If the court approves the plan, it allows the debtor to pay their debts within three to five years.
A trustee in a chapter 13 bankruptcy won't sell a homeowner's nonexempt property if they can pay an amount equal to the nonexempt portion through their repayment plan. This can be costly if they have a lot of nonexempt equity in the property. If they don't have the income, it's unlikely that the court would approve the plan.
Filing for Bankruptcy With a Homestead Exemption
Filing for bankruptcy is the same everywhere. Federal law, not state law, dictates the bankruptcy process. Applicants can find a federal bankruptcy application (Voluntary Petition for Individuals Filing for Bankruptcy) online. When filling out the form, they should be as accurate and complete as possible. If spouses file jointly, they are equally responsible for entering the correct information.
While federal court deals with bankruptcies, New Hampshire law protects the homeowner with its homestead exemption, which the homeowner includes on the Schedule C - Property Claimed as Exempt form their bankruptcy application packet. Here, they'll answer these questions:
- When asked, "Which set of exemptions are you claiming?" the homeowner will check one box only to note if they are claiming state and federal non-bankruptcy exemptions or federal exemptions. Federal non-bankruptcy exemptions are those that exist outside the federal bankruptcy code, such as retirement benefits, survivors benefits, or death and disability benefits.
- When asked, "For any property you list on Schedule A/B that you claim as exempt, fill in the information below," the homeowner will fill in a description of the property, how much of the exemption they are claiming, and the specific law allowing the exemption.
- When asked, "Are you claiming a homestead exemption of more than $189,050?" they will check "yes" or "no."
Eligibility for New Hampshire Homestead Tax Relief
New Hampshire also has a program allowing property owners to apply for relief of the state education portion of their real estate tax bill. Homeowners must meet these requirements:
- Homestead must be subject to New Hampshire education property tax.
- Property owner must reside in the homestead on April 1 of the year for which they claim relief.
- Property owner must have a total household income of $37,000 or less if they are single, or $47,000 or less if they are married or head of household.
Applying for Homestead Tax Relief
To apply for a homestead tax relief, applicants must fill out a Low and Moderate Income Homeowners Property Tax Relief Form DP-8 and file it with the New Hampshire Department of Revenue Administration not before May 1 and not after June 30, following the due date of their last property tax bill for state education property taxes.
Applicants must mail their claim to the New Hampshire Department of Revenue Administration, Taxpayer Services Division, P.O. Box 299 Concord, New Hampshire 03302-0299. They must also include:
- Last property tax bill per RSA 76:1-a showing the homestead's net assessed value.
- Copy of the federal tax return of each claimant and all adult members of the claimant's household during the same period.
- Homestead's MAP and LOT number, location and net assessed value.
What to Do if Tax Relief Claim Is Rejected
If the Department of Revenue Administration denies a homeowner's tax relief claim in whole or in part, it will notify the homeowner in writing within 90 days of its receipt of the homeowner's claim and documentation.
If an individual disagrees with the denial or the relief amount, they can file an appeal within 30 days from the date of notice by contacting the New Hampshire Board of Tax and Land Appeals (BTLA), Johnson Hall, 3rd Floor, 107 Pleasant St., Concord, New Hampshire, 03301-3834.
When writing an appeal to the board, the homeowner must include their legal name, Social Security number, a dispute explanation or description, their position on the rejection or adjustment, and a copy of the notice they received from the Department of Revenue Administration. They must also include a copy of the most recent deed to the home to prove ownership, as well as a copy of the property's assessment card.
- NOLO/All Law: Your Home in Bankruptcy: The Homestead Exemption
- NOLO: The Federal Bankruptcy Exemptions
- New Hampshire GenCourt: Chapter 76 Apportionment, Assessment and Abatement of Taxes
- New Hampshire Dept of Revenue: Low and Moderate Income Homeowners Property Tax Relief
- U.S. Courts: Schedule C: The Property You Claim as Exempt 04/22
- U.S. Courts: Voluntary Petition for Individuals Filing for Bankruptcy 06/22
- Experian: What Is Chapter 7 Bankruptcy?
- US Courts: Bankruptcy Forms for Individuals
- Federal Register.gov: Adjustment of Certain Dollar Amounts in the Bankruptcy Code
- Justia: 2019 N.H. Revised Statutes Homesteads Chapter 480 - The Homestead Right Section 480:1 - Amount.
- New Hampshire Department of Revenue: Frequently Asked Questions - Low and Moderate Income Homeowners Property Tax Relief
- Findlaw: Details on State Homestead Protections
- Find Law: Exempt vs. Non-exempt Property Under Chapter 7
- Upsolve: What are the federal nonbankruptcy exemptions and why does it matter?
- U.S. Courts advises hiring a lawyer for bankruptcy. Bankruptcy is a complex procedure that has lasting legal and personal effects.
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.