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Homestead Exemption

DEFINITION

A term that describes the legal protection of debtor’s from their unsecured creditors. The exemption is $50,000 for individuals, $75,000 for families, and $150,000 for seniors over the age of 65.

EXPLANATION

A homestead exemption will protect a homeowner’s home, in the scenario were the creditors command a contrived sale. The exemption will also accommodate shelter to a living spouse, and will grant an exemption on property taxes placed on the home.

Homestead Exemption vs Homestead Declaration

A homestead exemption is an automatic protection provided in California to everyone who owns, and lives in, a home. The amount of the exemption varies depending on the age, marital status, and income of the property owner:

$50,000-$75,000 for singles

$75,000-$100,000 for households

up to $175,000 for senior citizens, the disabled, and low income residents (less than $15,000 annual income)

Homestead Declaration

Some property owners may choose to file a homestead declaration in addition to an automatic homestead exemption. A homestead declaration — or declaration of homestead — is a written statement asserting that a particular dwelling is a property owner’s principal residence.

A homestead declaration offers additional protections to homeowners. Unlike with an automatic homestead exemption, a homestead declaration benefit is not automatically canceled if a home is seized or sold. Additionally, if a homestead goes into foreclosure, the proceeds of a foreclosure sale are protected from lenders for up to six months. If there is enough money left over after the sale, however, the remaining equity may be required to go to the lender.

A homestead declaration must be signed by the property owner, notarized, and recorded in the county recorder’s office where the property is located.

Legality of Homestead Exemption

When going through a homestead exemption, a landowner’s equity is automatically protected from creditors.

Furthermore, under an automatic homestead exemption, a property cannot be sold to satisfy a debt. Homeowners are not required to file a homestead; it occurs automatically.

If the equity of the homeowner is greater than the exemption amount, the home could potentially be sold at the court’s discretion. A property will, however, not be sold if the property’s equity is higher than the loan balance plus the homestead exemption.

Homestead exemptions apply to the following types of dwellings:

Residence or land

Condominium

Planned development

Apartment

Boat

Mobile Home

Stock cooperative

Only one homestead exemption applies to each married couple or domestic partnership. If multiple owners own title to the same property, each owner can claim the homestead exemption.

Homestead Exemption Amount

The following is a list of the homestead exemption amounts for each group of people:

Homeowner: Exempt up to $75,000

Homeowner with a family unit: exempt up to $100,000

Homeowner who is over the age of 65 or resides with someone who is: $175,000

Homeowner or spouse who resides with a family member who is physically or mentally disabled. Physically or mentally disabled applies to parties who cannot work or have the capacity to be employed: Exempt up to $175,000

Homeowner with gross annual income of less than $15,000 or $20,000 combined for a couple: Exempt up to $175,000

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