15.2.5.2 Conversion of Non-Exempt Property into Homestead Property; $125,000 Cap

Section 522(o) of the Code limits a debtor’s state homestead exemption when the debtor converted non-exempt property into exempt homestead property within ten years before the filing of the petition with the intent to hinder, delay, or defraud a creditor.¹⁰⁸

In addition, two provisions cap state homestead exemptions at $125,000 (adjusted for inflation every three years) in certain circumstances. Section 522(p) of the Code applies this cap to homestead property acquired during a 1215-day “look-back” period before filing a petition for bankruptcy.¹⁰⁹ However, the monetary cap does not apply to any interest transferred from a debtor’s previous principal residence to the debtor’s current principal residence if both are in the same state.¹¹⁰ Section 522(q) of the Code applies a $125,000 cap (adjusted for inflation) to a debtor’s homestead exemption if the debtor has been convicted of certain felonies or owes debts arising from certain unlawful conduct.¹¹¹