Homestead Laws, Debts and Bankruptcy – What You Need to Know - Updated July, 2014

April 28, 2005 - If you own your home, depending upon where you live, you may want to homestead it. That is because homesteading can protect a portion, or even all of your home’s equity from creditors. But how protected you are is largely dependent on what state you live in and on what kind of debts you have.


The federal Homestead Act was passed in 1862. The law specifically allowed people outside of the original 13 states to make claims for federal land. Families were allowed to claim up to 160 acres of federally owned land. They had to live on their claim and make improvements to it. After several years, the title to the land transferred to the person who made the original claim.

The law was specifically designed to protect the person filing the claim from creditors who were forbidden from placing liens against homesteaded land. The law served several purposes. Among other things, it encouraged settlers to migrate to the western United States and thus encouraged economic development in that region. It also gave debtors a chance to get a fresh start, keeping them off of any form of public assistance.

Because much of the supply of federal land was exhausted by the early portion of the 20th century, Congress largely ended the practice of federal homesteading in 1935. There have been some periodic exceptions since then, but these have been limited to specific areas.

It wasn’t just the federal government that had homestead laws however. Many states also had them, and these laws are still in effect. Like the federal law, these laws are designed to protect certain assets from creditors in the event of bankruptcy or other financial problems.

State laws differ greatly, and they do have certain exceptions. For instance, homestead laws can’t be used to protect your assets from the IRS. Many states will not allow you to use these laws to protect your assets, even in the case of bankruptcy, if you stop making child support or alimony payments.

In some states, homesteading takes place as soon as you move into your home and without a need to file any paperwork. In other states, you may need to live in your home for six months, and you may have to file a homestead claim with your county recorder.

The dollar amount of protection also differs greatly from state to state. Florida allows you to protect the entire value of your home. Arkansas is on the opposite end of this spectrum, offering only $2,500 worth of protection. Many of these laws will not protect you from debts incurred prior to the time the homestead was filed. This means that the sooner you file a homestead, the more protection you will receive.

One thing that is common to homestead laws is that they only protect your principle residence. In most cases, this means a permanent building that is a single family residence. Some states will also cover trailer homes. And some state laws also cover the contents of the home (i.e.: your furniture and other belongings).

Most homeowners are not aware that they can homestead their principle residence. This means that unless you live in a state that automatically offers homesteading, you may be needlessly exposed to debt collectors.

On the other hand, homesteading in states that offer little or no protection may be more trouble than it is worth. For example, if you are applying to refinance your home, you may be required to lift your homestead prior to getting that new loan you want.

To assist you in determining what kind of homestead protection is available to you, ACCESS has prepared the following list of links. Just click on your state and see what the law says. 

byJim Malmberg

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Written by Guest on 2006-06-26 Can anyone answer this. My spouse has a 30 year debt of back child support, we have been married for 22 years. Two years ago he signed and recorded a "quit deed claim" on our home, giving it to me. The house is in my name only. We did homestead it when we moved here (New Mexico). Is my home protected from the State of Texas/State of New Mexico for this debt? Please respond to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Thank you very much! DR

RE: Help

Written by jmalmberg on 2006-06-26 Please register with our site.

The answer to your question is that it probably depends on a three things. First, what was the reason for the quit claim? Second, where would the court case be heard. And third, what do the homestead laws in New Mexico say?

I'm not an attorney but the biggest issue that you face is probably the quit claim deed. If your husband signed a quit claim with a reasonable suspicion that he could be held accountable for child support (and I think this would be a pretty easy argument to make), then you may very well have a problem. All states have laws against this kind of property transfer. It is a practice that is known as either "unlawful conveyance" or "fraudulent conveyance".

In addition to civil penalties, which would most likely nullify the quit claim deed, if it can be shown that the conveyance occurred in an effort to avoid a court judgement such as child support, there may also be criminal penalties. Courts tend to frown on people that try to avoid their judgements.

You need to speak with an attorney to find out if you have real problem here.

New Mexico's law allows you (as a couple) to homestead $60,000 in value. But as the sole owner of the property, you can only homestead $30,000. That is not very much. If you have more than $30,000 in equity, you may be exposed.

Finally, unlike Florida (and to a lesser extent Texas) the type of homestead law that New Mexico does not guarentee you that you can keep your home no matter what.

Again, I think you need to speak with an attorney on this.


Written by Guest on 2006-07-19 We have several loans, including a home loan, at one bank. My husband had surgery and was unable to work for a few months. Two of our loans got behind and even though we were never behind on our house, the bank said that if we defaulted on even one of our loans, we would lose our house also. Can they do that?


RE: Worried
Written by cat101 on 2006-07-20 The only way that you could lose your home is -- first, the two loans that are behind are secured by your home.

Second, if they ARE secured by your home, then you need to see about redoing your mortgage so that you have only one payment.

Third, if they ARE secured by your home, then the lender needs to jump through hoops prior to forclosing on the home -- it doesn't happen over night.

Fouth, if the ARE NOT secured by your home, then the process to take your home is even more complex. Like first they have to have a judgment against you, then they have to file a lien on your home, then they have to force a sale & notify the primary lender, and on...

Regretfully, you didn't register with our site. If you had of, we would of been able to provide a better, more complete answer.


Adrienne from Michigan  - Unsure   | |2008-07-11 08:51:43
I am trying to refinance our home due to an adjustable rate. I cannot do this without adding my husband to our mortgage. He has had a lawsuit judgement against him for the past 6 years that hasn't been enforced. Is our home safe from this lawsuit?
jmalmberg  - Re: Unsure   |2008-07-11 10:47:14
The homestead exemption in Michigan is only $3,500 and that is probably only protected if you have filed the proper paperwork with the state. Any additional equity you have in your home would likely be vulnerable if you put your husband on the deed.

My recommendation would be to talk to an attorney prior to doing anything. With an outstanding judgement for a lawsuit, having him on the deed may not actually do you any good anyway.
cat101  - RE: Unsure   | |2008-07-12 20:18:15
I agree with Jim, I wouldn't add him, judgments can be kept alive for years. And they may already have a lien that would immediately go into place if you did,

I would suggest talking to friends & family to see who they got their mortgage thru. Try looking for a local banker. Every town over 22,000 people have at least one bank that 'specializes' in home mortgages. You may want to look in the paper to see if any local banks are advertising their mortgage rates. If you got the lien alone the first time, you maybe able to get it again. Some lenders qualify for assistance to current mortgages, ask your lender what they can do. Most would prefer to help you keep the home than lose it.

My brother lives in Michigan, it has been hit hard with the current economic situations. Best wishes
brad and whitney howarth  - if congress doesnt act now!how is the economy eve     | |2009-02-24 23:35:13
me and my wife met 4 years ago,we had good credit ! then a turn of events unfolded before our eyes that led us to no other decision besides claiming chapter 13 her father had taken over her old car payment 4 yrs ago with the assuption of liability on her mothers part since paula was the primary,on the loan. her father paid the vehicle loan for about 5 months after we met, sadly her father lost his job due to a painful addiction to oxycotin prescribed to him legally by amputee doctor,he developed a rare cyst disorder of feet and hands that was genetic, it was one of the worst documented cases,anyhow i tell my father inlaw he should sue! the doctor and drug company for ever creating that crap! they left him and his whole family impoverished as well for us! since he had to financially rely on us for a year and a half til he started social security for amputees since he could no longer work! her mother also fell ill in late 2005 for a terminal illness, and was unable to work and make payments on the car,and ultimatly filed disability! so the car got repo,d and the ball ran to my wife the secondary on the loan. in march of 2006. we had our own financial responsibilitys to pay our own car loans and credit cards,ect then my wife was in a accident in april of 2006! luckly she wasnt injured severely, anyhow we purchased a total loss insurance from the ford dealer! however failed to mention id didnt cover all the balance after insurance payoff needless to say we got left 5,000 balance on a car that may have existed in a junkyard! needless to say i had to borrow the money from my father in early 2007 to pay the bastards off! i will never do buisiness with bank of america ever again! thats why they are a failing institution,we would be wasting taxpayer money to bail them out! in the end crysler finacial wanted over 8,000 dollars from my wife,witch we didnt have nor did anyone we knew, and wouldnt negotiate anything reasonable paymentwise on a car her mother no longer had since it was auctioned off for 8,000 in 2006! needless to say they filed a garnishment on my wife wich took over 50% biweekly paycheck, and left us unable to pay all our bills,loan,car payment,rent ! this is september 2007 when the economy started going to hell! gas,food,nessities,and interest subprimes and overall inflation sent us where we are now! me and my wife set up a 5 year plan to payback chapter 13 trustees,they arent helpful ,encouraging,or respectful of anyboady! i guess they remind me of the bad investers on wall street that pumped the stock up! only to cash it all in and left millions without a future! I speak for all the people who filed bankruptsy of no single cause of self negligance! the credit beureu has it sights set to destroy ! debase! and make everyone a criminal so they cant get future credit, or good paying jobs or a appartment to rent! found out yesterday about renting discrimination even to people with means to pay without good credit ! how does congress ever expect to start repairing the economy! if they dont help people repair their credit? 7-10 years to deprive someone, cause of a misfortune,unconstitutional !!!!! if the laws dont change it will take 10-20years for the united states to prosper economically if we make through a possible world war 3! its scary! america needs credit reform for the innocent! i hope that someone out their understands and cares, and wants to solve this american crisis! i speak for everyone out there that lost their job,home and future to bankruptsy and greed on wall street! I hope someboady out their honest in congress the best of luck in making our country work again! sincerely_ Brad,
cat101  - If Congress doesn't   |2009-02-24 23:47:22
I'm not certain of your question, but we don't have the expertise to provide legal advice. However, you may want to send your situation to & see what they say.
SHAULIS  - CREDIT CARD HOLDER   | |2009-08-13 13:35:02
jmalmberg  - RE: Credit Card Holder     |2009-08-13 14:03:01
I used to be a big fan of American Express because once upon a time, they actually went way out of their way to help me. Not any more. They are changing their terms of service with a lot of people who have been very good customers. Two days ago, I got the same letter you received. The irony is that I don't have a balance for them to raise my rate on but I have thrown their card in a drawer and I won't be using it again any time soon. I am advising other people I know to do the same.

I would not just simply cancel the card, especially if you have had the card for a long time. This will hurt your credit rating.

You can call them and tell them that you don't accept their new terms of service. If you do this, your rates will remain the same as they are now (if it is a fixed rate card) or they will fluctuate at their old variable rate formula rather than the new one. You will no longer be able to use your card however and this will show as a canceled account.

Another thing that you may be able to do is transfer your balance on this card to another card. Some cards will offer you incentives to do this, such as a low fixed rate interest for the life of the transfer, or a lower rate for six months. If you have a card, or can find one that is offering this type of deal, you can keep your Amex account open (meaning that you won't hurt your credit) and possibly lower the interest rate that you are currently paying.

Eventually, you may be able to transfer the balance back to American Express using a similar offer from them. They frequently run this type of offer on some of their cards such as American Express Blue.

One thing that I would do is take a look at your current balance and interest rates. If any portion of your balance is billed at a preferred interest rate, this may be going away. I know that in the letter I received, this was specifically called out. If you have questions about how this will impact you, call Amercian Express directly and have them run through your current interest rates and how the new rates will change your bill.

Whatever you do, don't use your card again until you decide what you are going to do. Using your card after receiving a letter is the same as agreeing to their new billing scheme.

I hope this helps you.
ChandlerShannon27  - reply this post     | |2011-07-07 02:04:10
Some specialists argue that business loans help people to live the way they want, because they can feel free to buy needed goods. Moreover, a lot of banks present term loan for young and old people.
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