UNDERSTANDING THE CALIFORNIA HOMESTEAD EXEMPTION
The Homestead Exemption protects a portion of the value of a SINGLE piece of residential real property (or condominium or mobile home or boat) from attack by creditors. The homestead exemption can be effective to prevent the sale of property to unsecured creditors, but does not protect against secured creditors (such as mortgages and judgments recorded prior to recordation of homestead exemption). The homestead exemption is automatically triggered in bankruptcy.
The amount of the homestead exemptions is $75,000 and $150,000 depending upon the age, marital, and disability status of the individual. The specifics are found at Code of Civil Procedure § 704.730 and are summarized below.
PROTECTIONS AGAINST LEVY AND SALE OF HOMESTEAD
If someone gets a judgment against you and attempts to collect by forcing a sale of your homestead, that person must apply to the court for an order to sell the property. As part of the process, the judgment creditor must prove that the proceeds that would come from the sale of the homestead will be enough to pay all secured creditors in full, PLUS the amount of the homestead exemption.
For example, if you owe $100,000 on your mortgage and your homestead exemption amount is $75,000, then the judgment creditor would have to prove to the court that the home would sell for more than $175,000. If the judgment creditor can sell for more than the combined amounts of liens + homestead amount, then the property would be sold but you would receive payment of the homestead amount.
FILING A DECLARATION OF HOMESTEAD
A homestead is not necessarily the place you live. A declaration of homestead puts your creditors on notice that a certain piece of property is a homestead. If, for instance, you own several pieces of property, your creditor might argue that the one the creditor is trying to force the sale of is not a homestead.
Contact your local county recorder or a real property attorney to file a Declaration of Homestead. It is a very simple process and should not cost much money.