District of Columbia Homestead Laws

For those filing bankruptcy, there’s always the concern that they’ll lose everything. Homeowners can fear that, if they file a Chapter 7 or Chapter 13 bankruptcy case, they may have to surrender their house.

Under Washington, D.C. law, you have a good chance of keeping your principal residence. This article explains how the District of Columbia homestead exemption works, how it may help protect your house, and whether you can apply part of the exemption to other property, such as your car.

If you’re considering filing for bankruptcy but have questions about what will happen to your real estate, contact a Washington, D.C. bankruptcy lawyer. They’ll examine your situation, explain your options, and ensure you receive every protection you’re entitled to.

Overview of Washington, D.C. Homestead Protection Laws

The District of Columbia offers the most generous homestead exemption in the country. It protects all of the equity in your residential property, regardless of your home’s assessed value. You must meet certain criteria to claim the D.C. homestead exemption.

Bankruptcy filings use both state and federal bankruptcy rules. To claim the D.C. exemption:

• You must be a DC resident for at least 730 days (two years) prior to your filing date
• You must have purchased your home more than 1,215 days before filing your bankruptcy petition (just under 3.5 years)

If you meet these requirements, the bankruptcy trustee should approve your homestead exemption. If you are a recent homebuyer and filing for bankruptcy, the trustee may place your case under higher scrutiny.

How Does the Homestead Exemption Work in D.C.?

One major homestead benefit in Washington, D.C. is that there is no assessment cap. Property owners can protect all the equity in their home, even if the property assessment is much higher than the average property in D.C., Virginia, or Maryland. This can prevent the trustee from selling your home to pay off creditors.

The covered home must be the homeowner’s primary residence. It can be a house, a condominium, or most other types of dwellings. DC homeowners can use the D.C. Homestead Deduction Calculator to determine how much of your equity is safe from creditors. While senior citizens can receive additional tax exemptions on their property tax bill, the age of the filer doesn’t affect the homestead exemption amount. The same is true for the filer’s gross income.

Can You Apply Part of the Homestead Exemption to Other Assets?

Debtors may transfer up to $8,075 of any unused homestead exemption to protect other property under D.C.’s wildcard exemption. You can’t claim the same exemption twice.

How To Claim the Homestead Benefit in Washington, D.C.

When filing bankruptcy, you must file certain “Schedules” with your bankruptcy petition. These schedules provide the trustee and the bankruptcy court with lists of your assets and debts. The forms also help the trustee determine your eligibility for the homestead exemption.

When you file your petition, you must include the following Schedules:

• Schedules A and B: Include all your assets, regardless of whether you plan to keep the property or surrender it to the lender
• Schedule C: This is where you list your “exempt” property and state that you plan to claim the homestead exemption for your primary residence (if you’re filing a Chapter 7 bankruptcy, you must also cite the homestead exemption on your “Statement of Intention” form)
• Schedule D: Secured debts and creditors must be provided on this form, along with your mortgage, other financial institutions that have a claim on your principal residence, and any additional information that will help support your request for a bankruptcy discharge or homestead exemption

You must attach these forms to your bankruptcy petition. The goal is to make it as clear as possible that you intend to take advantage of the homestead exemption in your Chapter 7 or Chapter 13 bankruptcy.

Will the Mortgage Company Know You’re Claiming the Homestead Exemption?

When you file your bankruptcy petition, it can take up to ten days for the creditors to receive their bankruptcy notices. This means that the mortgage company may not learn that you’ve filed bankruptcy until the court has already processed your petition.

When the mortgage lender receives the notice, it will know you intend to keep your home. It will also let them know that you fully intend to claim the unlimited homestead exemption available in a D.C. bankruptcy.

Ten days doesn’t sound like a long time, but if your home is in foreclosure or a sale is already scheduled, don’t wait for the bank to receive your bankruptcy notice. You or your D.C. bankruptcy lawyer should call the bank and let them know of your plans immediately. This should keep the bank from taking any further collection efforts, including foreclosure.

Disclaimer: State laws may change due to new legislation, higher court rulings, and other means. While FindLaw strives to provide the most current information, consult a local bankruptcy attorney to confirm your state laws.

Consult an Experienced D.C. Bankruptcy Lawyer To Discuss Your Case

If you’re thinking about filing for bankruptcy but worry about losing your house, you’re not alone. To ease your concern, remember that the District of Columbia has a generous homestead exemption that will protect some or all of the equity in your home. To get a better idea of whether you can take advantage of the homestead exemption in your jurisdiction, contact a seasoned District of Columbia bankruptcy lawyer.