Senate OKs homestead protection hike

Monday, April 25, 2005 | 9:12 a.m.

SUN CAPITAL BUREAU

CARSON CITY -- Homeowners would be able to shield up to $300,000 equity in their homes in a bankruptcy proceeding under a bill approved by the Senate on Friday.

The present law protects only up to $200,000 equity in a home from a forced sale, a total that will be increased 50 percent by Senate Bill 173, which now goes to the Assembly.

President Bush last week signed an overhaul of the federal bankruptcy law that would reduce the homestead protection under certain circumstances.

Under the federal law a debtor must reside in the state for at least two years before claiming the state's homestead exemption. The current residency requirement is only 91 days. Some debtors move to states with the most favorable protection of their assets.

The homestead exemption, under the federal law, is also reduced to $125,000 if the person has been in trouble with the law. It says the lower amount is only available to those who have violated a securities law, committed a criminal act or engaged in reckless misconduct that caused serious physical injury or death. That federal law would override the state statute in such cases.

In 2004, 16,655 people filed for bankruptcy in Nevada, the fourth highest in the nation. The national average is 13.7 bankruptcies per 1,000 households; in Nevada the rate was 23.3 per 1,000 in 2004, according to the American Bankruptcy Institute.

SB173 also provides other exemptions from a writ of execution. For instance it raises to $5,000 from $1,500 the protection for private libraries. And it expands this protection to include works of art, musical instruments and jewelry.

The bill increases the exemption for necessary household goods and yard equipment to $12,000 from $10,000 and expands the property eligible for this exemption to include furnishings, electronics, apparel and other personal effects.