Monday, June 4, 2012

Georgia increases homestead exemption

On May 2, Governor Deal signed a bill that more than doubled the value that a bankruptcy debtor can exempt for his or her home in Georgia. The exemption available is now $21,500, up from the previous amount of $10,000, and a married debtor can still exempt double that amount -- $43,000. Georgia's bankruptcy exemption amounts for one's home are still low compared the amounts available in other states, but this is a much more meaningful amount.

The higher homestead exemption may not make a difference in many cases since many debtors have lost all equity in their homes, leaving no value to exempt at all. But it will make a difference to those who have a small but uncertain amount of equity by lowering the risk that a Chapter 7 would result in a liquidation that would cause them to lose their house. It could even allow a debtor to end up keeping a house with a large amount of equity.

 If you are reviewing the amount of equity and considering a bankruptcy filing, be sure you understand that the analysis requires practical considerations beyond the numbers on paper. If you have more equity than you can exempt in bankruptcy, it does not necessarily mean that you would lose your house in a Chapter 7 case. The next level of analysis in my office involves discussing the likelihood that a trustee would attempt to sell the house versus summarily abandoning it. I consider the amount of equity available versus the whole value, how easy or difficult it is to appraise the house, and the numbers and sizes of liens that are junior to the first mortgage. I may make recommendations to my clients or just advise them of the risks.