Refi or sell home - what happens to homestead exemption?

[arielle]

Question about homestead exemption. In AZ we are allowed 150K - which is close to what we'd net after the sale of our home if we chose to sell it. We're current on our 2 mortgages, but only a small portion of the $$ goes to principal since we refi'd last year (to get cash to try to save a floundering business). It's a waste of $ since it's almost like an interest-only loan.

If we were to sell our home & choose to rent for a few years while we rebuild credit, could we use part of the 150K to pay the rent?

Thanks much!! Appreciate all the posts & support!!

[axeshifter]

I'm no expert

That's a question for a lawyer. It's really hard to find reliable info on exemptions, especially if your looking for more than just basic info. My understanding of homestead exemptions is that they apply only to real property that you own. I would assume that proceeds from a sale of property would not be exempt. Of course I don't know, but I wouldn't count on keeping that money if you did sell. The real reason I replied had to do with using some of that to pay rent for a couple of years. We used our tax return this year to pay a year worth of mortgage payments. Our trustee questioned us pretty hard during our 341 meeting. If it wasn't for the fact that our lawyer had some bizzarre explanation as to why that was not preferential payment I think she would have tried to get the money back and distribute it to creditors. Thankfully I saw yesterday that she posted on pacer that we had no assets and no distribution would be made. Be careful and get some legal advice, even if it costs you it could save you from a big $ mistake.

[SinkingFast]

Proceeds from the Sale, immediately following BK, would be exempt up the amount you're allowed to claim in BK Homestead Exemption. If you've owned your home less than 3.5 years, I think it is, then the New Law $125K applies.

For people who've owned their home less than 3.5 years or will buy in the future, $125K is the max allowed in the New Law regardless of State allowances. If you've been in your home longer, you still qualify for your State's existing Exemption allowance.

If you're gonna realize profit in excess of what your Homestead Exemption will allow, you'd have to wait longer than 180 days after you filed to sell and keep the money. Otherwise, the Trustee could sieze your excess profits.