selling home just before BK

[craigm]

I was wondering if I were to sell my home just before filing bk7, pay the estimated capital gains to the IRS and State of CA, would my homestead exemption persist into the BK? I have already recorded a Homestead declaration at the county recorder. I'm wondering if the 75K exemption would persist because of that recording or do I actually have to be living in a homesteaded house at the time of the BK filing? (again, this is in California)

[tcreegan]

Hi Craig,

I was wondering if I were to sell my home just before filing bk7, pay the estimated capital gains to the IRS and State of CA, would my homestead exemption persist into the BK? ....After you sell, your portion of the sale can be exempted (up to the exemption limit) Any proceeds over the exemption limit goes back to the trustees All this is good for 6 months.

House = 450,000
Mortgage balance = 325,000
Equity = 450,000 minus 325,000 = 125,000 equity

Sell the house, put the sale proceeds of 125,000 in bank.

File BK. 125,000 = cash asset
Your state has a 75K homestead exemption.
125,000 minus 75K = 50,000 more than the exemption

Bottom line: You keep 75K and the trustee gets 50,000

All works for 6 months after the sale. After the 7 months, the entire 125,000 becomes an ordinary cash asset for the BK estate

If any of that makes sense to you, drink another cup of coffee.....

Tom in Colo