Many people consider their home a source of stability. Knowing that you have a comfortable place to return to after a long day and a space in which to safely store your belongings is undoubtedly a high priority for your family.
When you experience financial troubles that you cannot overcome and bankruptcy enters the picture, it can be an intimidating experience. Worrying that you may lose that source of stability your home provides can make it even harder to endure.
However, many states, including Mississippi, offer a method of protecting a portion of your home’s value during bankruptcy. The law refers to this protection as a homestead exemption.
What is a homestead exemption?
The purpose of a homestead exemption is to insulate your primary residence from claims by creditors. Your primary residence is the home in which you currently live. In Mississippi, this exemption protects up to $75,000. Additionally, the property you wish to protect can be as large as 160 acres.
How does a homestead exemption work?
While the value may seem low given rising housing costs, it involves determining your equity after deducting mortgages, taxes and liens. As an example, if you have a home with a value of $350,000 but its mortgage is $300,000, the $50,000 equity you have in your home would be well within the monetary limit that the exemption laws may protect.
Furthermore, money you gain from the sale of an exempted home is likewise exempt. This provides the opportunity to move if you need to, such as to seek new employment opportunities, while still maintaining funds for the down payment your next home would require.
How do you receive a homestead exemption?
Owning or living in a property does not automatically make it exempt. Instead, you must file a homestead declaration with the county tax assessor’s office. That said, you do not have to file the homestead declaration prior to the date you file for bankruptcy.