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What is Equity?

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In a Nutshell

Equity is calculated by taking the value of your property and subtracting any outstanding loans you have on it.

Written by Attorney Andrea Wimmer.  
Updated July 22, 2020

Equity is calculated by taking the value of your property and subtracting any outstanding loans you have on it.

If the value of your home is $200,000 and the balance on your (only) mortgage is $175,000, then you have $25,000 in equity in your home, calculated as follows:

Example: Value of house ($200,000) - Balance left on mortgage ($175,000) = Your equity ($ 25,000)

You can even have equity in your car, though that is less common as vehicles usually only go down in value. Still, the calculation remains the same:

Example: Value of Car ($7,000) - Balance left on car loan ($3,100) = Your equity ($3,900)

When you file bankruptcy, exemptions protect the equity you have in an asset. That means your house or car can be 100% protected even though it is worth a lot more than the available exemption, as long as your equity is less than that.

Some examples to illustrate how this works:

Table with examples illustrating non-exempt equity

If your house or car is worth less than what you owe on your mortgage or car loan, you don't have any equity and the trustee will not be interested in the asset.

Written By:

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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