For many people considering bankruptcy, they are concerned with how bankruptcy will affect their home. Will I have to sell my home to pay off creditors? Will it be liquidated because I have equity in it?
The first question is whether or not your home is an exempt asset. An exempt asset is one that you can protect from creditors. If an asset is not exempt, then creditors can sell that asset to satisfy debts. The good news is that all states have special bankruptcy exemptions specifically for primary residences.
Kansas is one of the few states that offer an unlimited homestead exemption for bankruptcy filers. There are a few restrictions that exist, but for most people, they are able to protect the entire value of their home from creditors and liquidation, regardless of how much the home is worth.
There are a few limitations-
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) added the limitation that a homeowner must have purchased the home at least 1215 days (around 40 months) prior to filing for bankruptcy. If the home was purchased more recently than that, the homestead exemption is limited to $125,000. This limitation was added to close what was perceived as a “mansion loophole” where prior to filing bankruptcy a person could sell unprotected assets and use the proceeds to purchase a large house. The person then files for bankruptcy and can protect the full value of the home immediately.
Additionally, the Kansas homestead exemption can protect properties up to one acre in incorporated town or city. Outside of an incorporated town or city, the exemption can protect up to 160 acres of land.
Overall, Kansas has a very generous homestead exemption, and if you live in Kansas and are considering filing bankruptcy, you should speak with an experienced bankruptcy attorney to determine how a bankruptcy filing would affect your home and if the unlimited Kansas homestead exemption is available to you.