Table of Contents:
- The Connecticut Homestead Act
- Arkansas Homestead Act
- Mississippi Homestead Laws
- Colorado Homestead Law
Connecticut began enacting exemption laws in the 1700s and began modernizing them in 1977. The motor vehicle exemption established in 1983 has not been adjusted since. The homestead exemption was established in 1993 with an exemption amount of $75,000.
Updates To The Law
In 2003, Connecticut raised the exemption amount to $125,000 for judgments and debt related to medical treatment. The act also provides provisions for interest in personal property up to $1,000.
How it Works
The Connecticut Homestead Exemption law is based upon the fair-market value and equity value of a home. The law permits a debtor to exclude his home from the execution of a judgment up to a value of $75,000, or $125,000 if the debt is the result of a medical-related bills.
Exceptions and Limits
The value protected under Connecticut law is doubled if the home is owned jointly by both spouses. In that case, the exemption for a homestead would be valued at $150,000, or $250,000 if the debt was the result of a hospital or medical bills. The exemption law in Connecticut does not protect the homeowner from debt related to taxes, mortgages, statutory liens and consensual liens.
National Homestead Laws Past and Present
When the original Homestead Act was passed in 1862, it was designed to encourage settling and protect home ownership in the new frontier of the west. By 1934, over 1.5 million applications for homesteads had been processed covering over 10% of all land in the United States. In 1976, Congress passed the Federal Land Policy and Management Act which repealed the national Homestead Act in the 48 continental states and granted Alaska a 10-year extension on claims. This repeal led to individual states enacting their own homestead laws to protect homeowners.
The legislature created the Arkansas Homestead Act in 1868. The intent of the law was to protect Arkansas families from want and dependence, according to the Arkansas Bar Association. The concept of protecting families as opposed to individual creditors carries forth to this date in Arkansas.
The function of the Arkansas homestead exemption is to protect the primary residence of either a married Arkansas couple or a single person with minor children. The law prevents certain creditors from placing liens and attempting to seize the primary residence of these classifications of people.
The laws in a majority of states in the country place a cap on the total amount of equity that exists in a primary residence that is subject to homestead exemption protection. Such is not the case in Arkansas. There is no limit on the value of a homestead nor on the amount of equity accumulated in that residence. Appellate courts in Arkansas consistently ruled to confirm that there is no ceiling on the value of exempt homestead property, according to the Arkansas Bar Association.
The Arkansas Homestead Act places limitations on the size of property claimed as homestead. Within an incorporated city, the size of the lot must be no more than one-quarter of an acre. Eighty acres in a rural areas can be claimed as exempt.
10-Year Reach Back
A recurring practice in Arkansas involved individuals facing financial problems selling non-exempt assets like stocks and putting the proceeds into their homestead properties. In other words, in anticipation of bankruptcy, these individuals converted assets that would have been subject to distribution to creditors in bankruptcy into cash that was then used to pay down the loans on their homestead properties.
Arkansas bankruptcy provisions now permit the bankruptcy court to reach back 10 years to examine whether any such transactions were made. If these types of transactions are identified, the amount of money involved is not protected by the homestead exemption.
Under Mississippi law you have the right to keep your property free from collections actions and other creditors to a certain extent. Homeowners can keep up to 160 acres, or $75,000 in equity, which ever is lower, outside the reach of creditors. To qualify for this protection, the property owner must occupy the property as his or her primary residence.
To take advantage of the homestead exemption, property owners must file a homestead claim with the county tax assessor's office in the county in which they live. In the case of a spouse's death, the homestead exemption will also extend to the surviving spouse or to the couple's minor children.
Homestead Exemption Filings
When filing for homestead exemption, Mississippi residents must provide: their last tax bill or a recorded warranty deed, a drivers license with the current residential address, Social Security number and Mississippi vehicle registrations reflecting the current residential address. Once filed with the county tax assessor's office, these filings will automatically be renewed as long as there has been no change in title, marital status, or change of address.
Buying a new home in Mississippi will make you eligible for the homestead exemption provided you do not already have a current homestead exemption filed. (A new home doesn't have to be recently constructed, merely newly purchased by the owner.) If the home purchased had already been claimed as a homestead exemption by the previous owner, the new owner will have rights to that homestead exemption for the remainder of the calendar year in which the sale was made. The new owner must then file for a homestead exemption in his name the following year.
Many states protect homeowners from losing their primary residences in case of bankruptcy, an exemption known as the Homestead Law. In Colorado, the Homestead Law allows you to exempt up to $60,000 of the value of your home when filing for bankruptcy, but only if you have equity in the home.
Equity and the Exemption
The homestead exemption applies to your equity, which is the difference between the value of the house and what you owe on the mortgage. For example, if your house is worth $120,000 and you still owe $60,000 on the mortgage, you have $60,000 worth of equity. If your house is worth $75,000 and you still owe $50,000 on the mortgage, you have $25,000 worth of equity.
In both these situations, your equity would be exempt under Colorado bankruptcy law. If your equity is above $60,000, however, you can't claim all of it. For example, if your house is worth $150,000 and you only owe $25,000 on the mortgage, you have $125,000 worth of equity, but only $60,000 of this equity would be exempt.
Protecting Your Home
The equity in your home is considered an asset. In a Chapter 7 bankruptcy case, all non-exempt assets can be liquidated or sold off to discharge your debts. If your equity is equal to or less than the Colorado exemption, your house won't be sold off to pay your debts because none of that money is available to pay off creditors.
If your equity is greater than the exemption amount, then your house could be sold off to pay your creditors. You would still receive all the equity to which you're entitled under Colorado law, but you won't be able to keep the house. Instead, the bankruptcy trustee will give you a check for your exempt equity.
In a Chapter 13 bankruptcy case, you may be able to keep your home if you pay the non-exempt portion of the home's value to your creditors.
Limitations and Exceptions
Your exemption increases to $90,000 if you, your spouse or your dependent are over 60 years old or disabled. Unlike some other states, Colorado does not allow married couples to double their homestead exemption or use the federal homestead exemption.
To qualify for the homestead exemption, you have to be living on the exempt property. The only exception is if you have already sold it, in which case the exemption applies to the sales proceeds for two years. Under federal law, you cannot claim a homestead exemption in any state until you have been a homeowner there for at least 40 months.
If you are behind on your payments, or a lien is attached to the property, the Homestead Law does not apply and your creditors will still be able to take your home. Under Colorado foreclosure law, a loan is considered delinquent one day after the payment due date and goes into default after 30 days. If your loan is in default, the bank can start foreclosure proceedings at any time if you have a conventional loan. This is the case even if you've only missed one payment. If you have a loan from the Federal Housing Administration, the foreclosure process doesn't start until you miss three payments.
If this happens, you might be able to stop the process by filing a form with the county's public trustee office at least 15 days ahead of the auction, announcing your intent to get caught up. If you file this "intent to cure" form, the trustee will let you know how much you need to pay to prevent foreclosure. However, the Homestead Law offers no protection in this situation.