Accidents, illness and misfortune are some inevitable things that might occur throughout your lifetime. These events, however, should not mean that you must necessarily incur unreasonable debts or feel the anxiety that your home might be taken away from you or your loved ones. This is where the Homestead Exemption could give you protection against creditors from any equity that you may have in your home.
The Homestead Exemption works by protecting the equity in your home. For example, if the market value of your home is $120,000 and you have a first mortgage or deed of trust of $65,000 and a second mortgage of $25,000, you have equity of $30,000. If a creditor were to sue you for the equity in your home and win, the Homestead Exemption acts to protect against any such lien against your home to keep your family in place.
The homeowner is the entity who may file the Declaration of Homestead. It remains in effect either until the house is sold or the homestead is abandoned by recording an Abandonment of Homestead. There are limits and exceptions to the Homestead Exemption, and specific questions can be answered by a Title Executive or your attorney.
For a more detailed description of the Homestead Law, we have included a PDF for review. Ticor Title strongly suggests you consult an attorney for legal advice on your specific situation.