December 15, 2019

An Exemption Trap?

One of the less well known components of the BAPCA bankruptcy law changes has to do with exemptions.  Exemptions, as you may know, refer to those assets that are sheltered from seizure by the trustee.  You can read more about the Georgia exemptions on my Georgia bankruptcy law web site.

For example, in Georgia, you can shelter $5,000 in household goods, as long as no individual item is worth more than $300.  Therefore, for practical purposes, your television, stereo, clothing, clock radio, etc. is not at risk.

One of the most important exemptions has to do with your home.  In Georgia, you can shelter $10,000 of equity in your home ($20,000 of equity if you file jointly with your spouse).  In other States, however, the “homestead exemption” may be much larger.  For example, in Florida, your can declare as exempt 100% of your equity.

Thus, two identical debtors, one who lives in Georgia and one who lives in Florida, could have very different bankruptcy experiences. The Florida debtor could own a $250,000 house free and clear and still qualify for Chapter 7 without risking his house, whereas the Georgia debtor would lose his house to the trustee.

Because of this disparity in exemption rules, Congress changed the Code to provide that a debtor who moves from one State to another must use the first State’s exemption laws for two years.  After he has been a resident of the new State for two years, he must use the new State’s laws.  The purpose of this change was to stop people from moving to States like Florida to shelter their assets in real estate.

Florida attorney Jonathan Alper raises an interesting question in his blog about what happens if an individual moves to Florida, buys a house then encumbers his new homestead with a home equity line of credit in his spouse’s name.  Jonathan has one opinion about the repercussions and I have another, but the point here is that when new rules are created, there are always going to be fact patterns that no one expected and that may result in unexpected or undesirable results.  My sense is that there are going to be a lot of these unknowns in the new law and we are just starting to see some of them work their way up the appellate system.  My colleague Scott Riddle publishes a blog that looks at some of these new developments in the law and I read it regularly to keep up to speed.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.


  1. so are you saying that if you file bankruptcy, anything worth more than $300 individually can be taken to pay for your debt? I’m new to this. And in terms of the homestead exemption, let’s say you sell your house because you can’t afford it anymore — you only get to keep $10k of the proceeds?

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