Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Connecticut, bankruptcy exemptions allow individuals to protect certain property from creditors when filing for bankruptcy. The homestead exemption is particularly relevant for protecting equity in one's home. As of the knowledge cutoff in 2023, Connecticut's homestead exemption allows an individual to exempt up to $75,000 of equity in their primary residence. This amount can be doubled for married couples filing jointly if both have an ownership interest in the property. Additionally, Connecticut allows debtors to choose between state exemptions and federal bankruptcy exemptions, providing flexibility in asset protection strategies. The type of bankruptcy filed—Chapter 7 or Chapter 13—also influences the application of exemptions. In Chapter 7, assets can be liquidated to pay creditors, so exemptions are crucial to protect property. In Chapter 13, debtors keep their property but must repay a portion of their debts through a repayment plan, and exemptions may affect the plan's terms. It's important for individuals considering bankruptcy to consult with an attorney to understand how exemptions apply to their specific situation and to maximize the protection of their assets.