The California homestead exemption is considered a superhero in the exemption world because of the value that it can protect. The homestead can protect up to $75,000 for a single person, $100,000 for a couple and $175,000 for the elderly or disabled. While the California homestead exemption is powerful, there are a number of other facts that you need to know about it.
The California Homestead Exemption Is More Powerful Than Judgment Creditors
The judgment credit is a particular type of creditor that the homestead exemption protects people from. The judgment is the result of a lawsuit and the determination that you owe the creditor a set amount of money. The judgment allows the creditor to use certain legal powers available to the state to collect the money that you owe.
However, the homestead exemption is considered more powerful in the eyes of the law. The exemption ensures that you will have a place to live even if you own money to the creditor. This ensures that you will not be made homeless by the creditor.
The Exemption Is Not Absolute
It is important to note that the homestead exemption does not guarantee that a creditor that undergo personal bankruptcy cannot force you to sell your home to pay the debt. It will guarantee that you get the dollar value of your home from the forced sale before the creditor gets any money. It is the responsibility of the creditor to prove to a judge or sheriff that the sheriff’s sale of the homestead will bring enough to pay you the homestead amount.
The costs that come with ensuring that the homeowner gets their homestead first is a deterrent for many judgment creditors. There is too much uncertainty with these cases and the costs often outweigh their returns.
It Is Not A Protection From Foreclosure of California Homestead Exemption
The law in California allows you to use your homestead as property collateral for a loan. This means that you are giving the lender the right to foreclose on your home without any regard to your homestead. A foreclosure of this nature does not have to pay you the homestead. This is due to the fact that the law deems that the transaction which put your homestead at risk was voluntary on your side.
There Are 2 Styles Of Homesteads
There are 2 styles of homesteads that you need to know about and they are the automatic homestead and the declared homestead. The automatic homestead comes with the purchase of your home and will protect it from forced sale. However, if you choose to sell your home and a creditor has a lien attached, they will be paid from the sale before you are paid.
The declared homestead will work differently, but the homestead amounts remain the same. The declared homestead also protects exempt equity if you choose to voluntarily sell your home. The exempt proceeds will be protected for 6 months after the sale of the property. This period of time is given to provide you with time to reinvest in a replacement home.