Margaret owns a home in Lawton, Oklahoma as her primary residence. She is not married. She owes $180,000 on a mortgage and has an unsecured judgment lien of $50,000 from a lawsuit. The home is appraised at $220,000 and sits on a standard city lot of 0.25 acres. Margaret files for Chapter 7 bankruptcy. Which statement most accurately describes the effect of Oklahoma's homestead exemption in her bankruptcy proceeding?
Correct Answer
D) Margaret can exempt the home from the judgment lien creditor's claim using the homestead exemption, but the mortgage lender retains its secured lien on the property.
Oklahoma's constitutional homestead exemption protects a primary residence on up to one acre within city limits from forced sale by general (unsecured) creditors. In bankruptcy, Oklahoma allows debtors to use the state homestead exemption. The $50,000 unsecured judgment lien can be avoided (stripped) using the homestead exemption because the home qualifies as Margaret's urban homestead (0.25 acres, within city limits, primary residence). However, the mortgage is a voluntary consensual lien that the homestead exemption does not defeat. The mortgage lender retains its secured interest regardless of the homestead exemption.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Tenancy in common is a form of co-ownership in which two or more persons hold separate, undivided interests in property without the right of survivorship. Each owner can hold unequal shares and can independently transfer their interest.
A freehold estate conveys ownership rights, while a leasehold estate grants the right to possess and use property for a specific period without ownership.
Riparian rights concern properties bordering flowing bodies of water (rivers, streams), while littoral rights concern properties bordering non-flowing bodies of water (lakes, oceans).
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