Even if they are starting over, federal bankruptcy laws give consumers certain rights to retain some of their properties. The purpose of bankruptcy law is not to punish the debtor and prevent them from starting over. well explained here
The aim is to handle your debt situation in such a way that creditors are treated equally while still balancing the consumer’s right to some cushion before starting over, to save some personal properties, and to have some means of restarting.
The federal bankruptcy law requires the debtor to exclude such property from creditors for certain purposes. Depending on the amount owed on the loans and the debtor’s equity in the property, the debtor will still secure some property even though the borrower has a security interest in it.
The following are the main exemptions given by federal law. Please keep in mind that Connecticut has its own exemptions that could be a better option. In certain cases, you must choose either one or the other set of exemptions (federal or Connecticut). Some states require you to take advantage of the state exemptions.
Connecticut is not one of them; you can pick and choose from the federal exemptions, but you can’t combine them. The advantages and disadvantages of both the state and federal exemptions will be explained by an accomplished Connecticut lawyer.
When a married couple files for bankruptcy, each spouse receives their own collection of exemptions. In most cases, this ensures that married couples will double the value of the exemption if they both own a stake in the property in question.
Inflation and other economic conditions are factored into the exemptions on a regular basis. In 2016, the next change is expected. Just once every three years are adjustments made.
The Exemption for Homestead
This is the exemption that applies to your real estate. It’s designed to help you retain your home’s equity. It’s only suitable for use in your own home, where you sleep at night. Mobile homes, condos, and single-family homes are also considered personal residences. The federal homestead exemption is $22,975 as of 2015.
This means that if your house is worth $150,000 and you owe $75,000, you can keep it if you use the Connecticut exemption (provided you continued to make the monthly mortgage payments). If you filed a Chapter 7 bankruptcy and used the federal loophole, the trustee may sell your house and pay you $22,975 from the proceeds. If you apply for Chapter 13, the Trustee’s ability to sell your property becomes more difficult. It all depends on how you plan to handle your arrears and other debts.
The value of your home is usually determined by a real estate appraiser.