by Adam Mack, J.D.
When filing bankruptcy a critical issue is to understand how bankruptcy can affect your home. It is important to realize that when you file bankruptcy that everything you own or have an ownership interest in is either exempt or not exempt. If an asset is exempt that means you will be able to keep that asset when you file your bankruptcy. If it is not, then you may have to surrender that asset to someone referred to as the bankruptcy trustee after you file bankruptcy.
Fortunately for those facing bankruptcy, all states have a special bankruptcy exemption for the primary residence for individuals who do file for bankruptcy protection. Even more fortunate is that Kansas is one of the few states that has an unlimited homestead exemption for bankruptcy filers. This means that regardless of how much your house is worth, the full value of your home may be exempted in bankruptcy.
All that said, the Kansas bankruptcy homestead exemption is not without its limitations. There are some restrictions that may affect some bankruptcy filers. For example, if you live in an incorporated town or city, then your home must be on a plot of land that is one acre or less. If you live outside the limits of such a town or city, then your homestead exemption can exempt up to 160 acres of land.
Also, for you to be able to claim the unlimited Kansas Homestead Exemption you must have purchased your home at least 1215 days (approx. 40 months) prior to filing your bankruptcy. If you purchased your home sooner than 1215 days of filing your bankruptcy, then you are limited to a $125,000 exemption. However, this means that you must have more than $125,000 in equity in your home for it not to be fully protected by the exemption.
This particular limitation was added to the bankruptcy code through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The change was aimed in part at closing the so-called “mansion loophole” for states which have an unlimited homestead exemption, such as Kansas. The idea was that a person with significant non-exempt assets could liquidate those assets, use the money from the liquidation to purchase an expensive and fully exempt home, then file for bankruptcy without having lost the value of the assets he or she liquidated.
If you are considering bankruptcy and you own any real property of any kind, it is important to speak with a bankruptcy attorney. Even if you own real property that is not likely to be protected by the homestead exemption, you should still discuss your options with a bankruptcy attorney to explore how best to maximize the benefit of bankruptcy protection while protecting your property to the fullest extent allowable under the law.
These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!