Understanding the Bankruptcy Homestead Exemption and the 1,215-Day Rule

In a prior post, I discussed the residency requirements in the Rudy Giuliani bankruptcy case, as it served as the perfect case study of understanding what is at stake with assets and bankruptcy exemptions. In this case, it was a $3.5 million condo in Palm Beach.

But regardless of who the debtor is, even if a debtor successfully proves they are a resident of a state with “unlimited” homestead protection or substantial protections like Florida or Texas, there is a second, much larger hurdle to cross: The 1,215-Day Rule.

Often called the “Mansion Loophole,” this rule was designed specifically to stop people from taking a suitcase full of cash or selling their home, and walking into a debtor-friendly state like Florida, and filing for bankruptcy the next day.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: The 1,215 Day Rule Bankruptcy Exemption Homestead Rule

• The 40-Month Requirement: To use a state’s full, unlimited homestead exemption, you must comply with the 1,215 day rule.
• The 2026 Federal Cap: If you haven’t hit that 1,215-day mark, your equity protection is capped at $214,000, an increase from the previous limit of $189,050.
• The Anti-Mansion Loophole: This rule exists to prevent “forum shopping,” moving to a debtor-friendly state like Florida or Texas just to hide millions in a luxury home.

What is the 1,215 Day Rule? The 40-Month Clock: Why You Can’t Just “Buy” Your Way Into Asset Protection

Under 11 U.S.C. § 522(p), if you acquired your home within the 1,215 days, approximately 40 months, before filing for bankruptcy, your homestead exemption is capped, regardless of that state’s exemption. This is commonly referred to as the 1,215 day rule in bankruptcy.

Even if your state law says you can protect an unlimited amount of equity, the federal Bankruptcy Code prohibits it. For cases filed in 2026, that cap is $214,000. If you bought your home 1,200 days ago, any equity you have above that $214,000 mark is potentially fair game for your creditors, potentially pushing you into an unaffordable Chapter 13 bankruptcy.

The Professor’s Note: Before the latest inflation adjustment, the federal cap under the 1,215-day rule was $189,050 under 11 U.S.C. § 522(p). Always make sure to use multiple sources for accurate figures, as my experience researching for my textbook, Consumer Bankruptcy Law, showed that even popular sources were sometimes outdated by 3 years or more.

Likewise, the Means Test figures were recently updated. You can find your state’s average income for purposes of the Means Test in this prior article.

The Homestead Rollover Exception

There is one major exception to this rule. If you sold a previous principal residence in the same state and moved that money into your new home, that equity is generally protected. The clock doesn’t reset if you stay within state lines.

However, this is exactly why crossing state lines, like moving from New York to Florida, will fail. You can’t “roll over” equity from one state to another to bypass the 1,215-day clock.

Don’t Confuse the Residency Requirements with the Federal Exemption

It is very easy to get these two “federal” numbers mixed up, but they serve completely different purposes:

The 1,215-Day Cap ($214,000): It applies to people using state laws to protect their equity. It limits how much of that state protection you can actually keep if you are a new resident.

The Federal Homestead Exemption ($31,575): This homestead bankruptcy exemption applies to homeowners who live in states that use the federal exemptions, or whose state offers a choice between state and federal exemptions, and whose state exemptions are lower.

I will dig deeper in my next post on the $31,575 Federal Exemption and when it applies.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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