What is a Homestead Exemption?

What is a Homestead and what does it do?
A homestead protects a homeowner from losing their home due to creditors. For example, if you are sued for money in court and lose the case, the person who sued you will receive a judgment against you from court. If you do not pay the judgment, they can try to collect the money you owe by garnishing your wages, bank accounts or by having your automobile or home sold to pay the debt. The homestead law protects a certain amount of the value of your home from being taken to pay a judgment. There are two kinds of homestead exemptions: one is automatic and the second is declared.

Automatic Homestead
In California, you don’t necessarily have to file a homestead declaration. An automatic homestead protects your home against a forced sale if the proceeds wouldn’t be enough to pay the homestead before the creditor. If there’s a judgment lien on your property, the creditor gets paid from a home sale before you get the homestead. Homestead amounts are the same for automatic and declared homesteads. The difference is that a declared homestead only protects exempt equity when a home is sold voluntarily. Proceeds are protected for six months during which you can reinvest the homestead in a new home (if that amount covers the sale price and other costs). Filing a declaration is a good idea if you have equity in your home and experience financial trouble. Your homestead won’t be lost after a property sale and the proceeds will be protected for a full six months.

Declared Homestead Exemption
The homeowner can have a declared homestead exemption as well by filing a homestead declaration form with the County Recorder in the county where the house is located. Although the amount of the exemption does not change or increase when a homestead is filed, it does offer extra protection in that it is not automatically lost when the homeowner moves. It also protects proceeds of the sale exempted by the homestead from creditors for six months after the house is sold, even if the house was voluntarily sold by the homeowner.

Increase in California Homestead Exemption Effective January 1, 2021
The California homestead exemption in 2020 and prior was $75,000 for a single homeowner, with a maximum of $175,000 for homeowners who met specific family, income, and age requirements. The new law eliminates many qualifying conditions and provides a homestead exemption to anyone with a principal residence. As of January 1, 2021, the California homestead exemption amount will be at least $300,000 if the median sale price for homes in your county were less than that during the prior year. However, it can be as high as $600,000 if the median sale price in your count was more than that amount. These amounts would adjust annually for inflation. (AB 1885)

What a Homestead does not do
A homestead does not protect against the forced sale of a house by a bank, savings and loan or any other lender holding a mortgage or deed of trust on the home. It also does not protect against the enforcement of a valid mechanic’s lien, or judgment for child or spousal support.

Where do I record a Homestead?
At the County Recorder’s office for the county which the property is located.



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