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I need an explanation of the Homestead Exemption and how it…

I need an explanation of...
I need an explanation of the Homestead Exemption and how it works during a Chapter 7 filing.In Louisiana, there is a $35,000 homestead exemption on the primary residence. Let's say that I have a home with an expected sales price of $535,000 and the mortgage and equity loan total is $475,000, then the equity would be $60,000 (not including the broker sales fee and seller closing costs). If in a Chap 7 proceeding, the Trustee elects to sell the house and the proceeds do equal $60K, do I get a $35,000 payment for the equity homestead exemption which I would keep and could not be used to repay creditors?If I would not get the $35,000 payment, what is the purpose behind the homestead exemption? In a similar example, if the house sells for $535K and the mortgage and home equity loan total $500K, then the gross equity would be $35,000. Would that then mean that the Trustee cannot sell the house? But theoretically, if the equity would be any greater than $35K, the Trustee could sell the house and I would get nothing?
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Answered in 4 hours by:
3/24/2017
Phillips Esq.
Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 22,735
Experience: B.A.; M.B.A.; J.D.
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Hello: This is Phillipsesq. Welcome to JustAnswer! I am reviewing your post, and I will post my response very shortly. Thank you for your patience.

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I need an explanation of the Homestead Exemption and how it works during a Chapter 7 filing.

In Louisiana, there is a $35,000 homestead exemption on the primary residence. Let's say that I have a home with an expected sales price of $535,000 and the mortgage and equity loan total is $475,000, then the equity would be $60,000 (not including the broker sales fee and seller closing costs).

Response 1: Equity would be net proceeds from the sale (gross sale minus mortgage, equity loan, property taxes, broker's commission and all closing costs that the seller is responsible for).

If in a Chap 7 proceeding, the Trustee elects to sell the house and the proceeds do equal $60K, do I get a $35,000 payment for the equity homestead exemption which I would keep and could not be used to repay creditors?

Response 2: Yes.

If I would not get the $35,000 payment, what is the purpose behind the homestead exemption?

Response 3: You would because that's why you have homestead on the property.

In a similar example, if the house sells for $535K and the mortgage and home equity loan total $500K, then the gross equity would be $35,000. Would that then mean that the Trustee cannot sell the house?

Response 4: Yes, because there would be nothing in there for the Trustee. The Trustee will not try to sell a property with nothing going to the Trustee.

But theoretically, if the equity would be any greater than $35K, the Trustee could sell the house and I would get nothing?

Response 5: No. You would get 35k, which represents your homestead exemption. The excess would go to the Trustee to pay your creditors and to pay the Trustee.

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Phillips Esq.
Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 22,735
Experience: B.A.; M.B.A.; J.D.
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