Did you know that your home is one of the easiest assets for a creditor to attach to?
Many people think that because they live in their homes they will not be evicted in the event of lawsuit by car accident, Medicaid or litigation. While that may be true in some state that offer an unlimited homestead protection, the fact is that it does happen and once wealthy people have lost their homes.
Most states provide some sort exemptions but with various limitations. Texas and Florida offer unlimited amounts while Pennsylvania is a total zero; although the equity in your home may be protected in PA if you and your spouse own it as a tenancy by the entirety or if you opt to use the federal bankruptcy exemption.
Tenancy by the entirety could work if only one spouse was brought into a lawsuit and subsequently lost.
Real Property Held as Tenancy in the Entirety
If property is held as a tenancy in the entirety, it means the property is jointly owned by a married couple as a single marital entity, not as individuals. Some states permit “tenancies by the entirety”, and this may allow debtors to file bankruptcy and protect more than the homestead exemption amount.
If property is held as a tenancy in the entirety, it is owned as a whole by both spouses and creditors cannot take it to pay the debts of only one spouse. While this may sound like a panacea, there is case law to suggest T by E is not the “super exemption” it was once thought to be.
There are limits to the protection provided by a tenancy in the entirety. If the family home ends up in bankruptcy, then federal rules apply. T by E will generally not provide protection in excess of the federal homestead exemption.
Periodic Adjustments of Federal Bankruptcy Exemption Amounts
The federal exemption amounts are adjusted on the first day of April of every third calendar year.
Protecting your home is not a simple matter. You need to know your states exemption laws, and plan with them and around them.
We can help sort through the maze of details.
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