What Happens After You File for a Homestead Exemption?

When gathering at your family reunion, you might hear stories about how ancestors homesteaded land in the United States. While this type of homesteading is a thing of America’s past, there is another type of homestead, the homestead exemption, common in many states. Instead of enabling the homesteader to gain ownership to real estate by living on and improving the land, as occurred during homesteading of previous generations, the homestead exemption provides the financial means for a displaced family to find a new residence.

Life Estate

A homestead exemption is a life estate the head of the household has in the family home, for as long as the family owns or leases the property. A family can only have one homestead exemption at a time, and if the property sells, the life estate or homestead exemption ends. The head of the household might be a single person and the sole family member.

Homestead Exemption

The homestead exemption exists in some, yet not all states. The amount of homestead exemption and how it is calculated also varies by state. States that don’t have a homestead exemption include Maryland, New Jersey and Pennsylvania.

Filing Requirements

In some states, the homestead exemption is automatic; therefore, there is no reason to file for an exemption. Other states require filing of the homestead exemption prior to filing for exemptions. Depending on the circumstances, it is sometimes necessary to file in Alabama, Idaho, Nevada, Texas, Montana, Utah, Virginia, Washington and Massachusetts. In “How to File for Chapter 7 Bankruptcy,” by Stephen Elias, Albin Renauer and Robin Leonard, the authors suggest that the requirement to file before gaining the benefits of an exemption may violate bankruptcy law, yet recommends filing as a safeguard.


After filing for a homestead exemption, nothing might happen, providing the family never has a cause to use the exemption. If the home sells to pay the family’s debts, such as during bankruptcy, the homestead exemption entitles them to keep a percentage of the profits from the sale. This amount varies according to state law. A homestead exemption does not negate the mortgage obligations the property owner has to the lender holding a mortgage lien on the family home. Normally, in a bankruptcy, after paying off the property liens and the homestead exemption to the family, any remaining funds pay off the family’s unsecured debts.