Marie-Claire buys a $3.5 million house in which she puts all of her assets. Six months later she declares bankruptcy. How much can she claim for her homestead exemption?

a. About $500,000

b. All $3.5 million

c. $1.75 million, or half the value

d. About $160,000

D) About $160,000

Explanation:

Marie-Claire can only claim the federal homestead exemption which provides a maximum exemption of approximately $160,000.

In case Marie-Claire lives in a state that allows homestead exemption (e. g. Florida, Iowa, Kansas, Oklahoma, South Dakota, etc.), they usually require a minimum time between the date of purchase and the bankruptcy filing. Most states require that in order for her to claim the exemption, she should have purchased the property at least 40 months before declaring bankruptcy.

Since she purchased the house only 6 months before filing for bankruptcy, her only available option is the federal homestead exemption.