Homestead Exemption Law

The new state "homestead exemption" law provides a $75,000 exemption from bankruptcy and other claims for an individual's home. You asked how it works and, particularly, whether a married couple that declare bankruptcy and jointly own their home can each get a $75,000 exemption, making the exemption a total of $150,000 for the couple.

The Office of Legislative Research does not give legal opinions and the following should not be interpreted as such.

PA 93-301 (sHB 5307), An Act Concerning Homestead Exemption for Residential Real Property, among other changes, exempts the "homestead" of an "exemptioner" up to a value of $75,000 from attachment and postjudgment collections. CGS § 52-352a (d) defines "exemptioner" as the "natural person" entitled to an exemption. The act defines "homestead" as owner-occupied real estate used as a primary residence. The act defines "value" as the fair market value of the real estate minus the amount of any statutory lien, such as a tax lien, or consensual lien, such as a mortgage, that encumbers it. It specifies that the exemption is limited to liens for any obligation or claim arising on or after October 1, 1993. Neither the act nor existing state law has any specific provisions concerning married couples.

Bankruptcy proceedings take place in the federal courts and are governed mainly by federal law. People who cannot pay their debts file for bankruptcy with the federal court. The court then appoints a bankruptcy trustee who liquidates the applicant's property and pays the creditors out of the available funds. Certain types of property are exempt from this process. Under federal law the homestead exemption is $7,500 per person, which means $15,000 for a married couple where both file bankruptcy, since each can take the exemption (11 U.S.C. Sec 522(d)(1), (m).

But the federal law allows a debtor to choose either the federal or state exemptions (11 U.S.C. § 522(b)).

In a case where both husband and wife declare bankruptcy and jointly own their home, the federal court would follow the same rules that apply to the federal exemption and double the $75,000 state exemption, for a total exemption of $150,000 for the couple's equity in their home, according to Attorney Neil Ossen, a member of the Private Panel of Bankruptcy Trustees for the U.S. Bankruptcy Court at Hartford.

The interpretation that the state legislature intended to double the $75,000 for married couples in such a situation is supported by comments in the debate on the House floor on June 4, 1993, an excerpt from which we have enclosed. We found no other mention of this aspect of the act in either the Senate proceedings or the public hearing testimony.