4.3 Limits on Homestead Exemption

The new federal law also limits the extent of a state homestead exemption.   The homestead exemption is reduced to the extent of any additions to the value of the property within ten (10) years of filing if the additions were made with the intent to defraud creditors.   New Bankruptcy Act 11 U.S.C. § 522(o).   Also any additions over $125,000 of value to the homestead within three (3) years and four (4) months of filing are reachable.   New Bankruptcy Act 11 U.S.C. § 522(p).   For debtors owing certain debts (security fraud penalties, intentional torts, etc. within the preceding five (5) years), an overall limit of $125,000 is put on the homestead exemption except if reasonably necessary for the support of the debtor and dependents.   New Bankruptcy Act 11 U.S.C. § 522(q).   These new homestead caps apply to states opting out of the federal exemptions.   As noted, however, Maryland does not have a homestead exemption.