|WHAT IS A HOMESTEAD DECLARATION?|
|The HOMESTEAD DECLARATION is document that is used to declare your homestead and thereby obtain certain protections for some of the equity that may exist in your home.|
|WHAT TERMINOLOGY SHOULD I KNOW?|
| The following definitions are useful in helping you better
understand the Homestead Declaration form.
HOME EQUITY: It is the value of the house that exceeds all liens and encumbrances. It is determined by subtracting the total of liens and encumbrances from the market value of the house. For example, if a house has a market value of $400,000, but there is $300,000 owed on the house, the home equity equals $100,000. The equity in a house can change. As house values increase, equity increases. As house values decrease, equity decreases. If house values stay constant, equity still increases if you are paying down the mortgage.
JUDGMENT LIEN: Generally, a judgment lien on real property is created when an abstract of a money judgment is recorded with the county recorder in which the property is located. A judgment lien helps the judgment creditor collect on his judgment against the judgment debtor. This concept is discussed more below.
JUDGMENT CREDITOR and JUDGMENT DEBTOR: Someone who has sued you and obtained a judgment against you is called a judgment creditor. You would be a judgment debtor.
EXEMPTION: An exemption is a debtor's right to a minimum amount of property (usually in terms of dollars) that cannot be reached by creditors.
|WHAT CAN A JUDGMENT CREDITOR DO TO MY HOUSE?|
|A judgment creditor can obtain
a judgment lien against your house. If you sell your house, that lien
will get paid from any available equity, thus decreasing any amount you
receive from your sale.
Additionally, if there is enough equity in your house, a judgment creditor may be able to force the sale of your house to collect on the judgment.
|IS THERE ANY PROTECTION FOR MY HOME OR HOME EQUITY?|
Yes. California law provides some protection against complete loss of home equity against judgment creditors under certain circumstances. In understanding these protections, it is important to know about and distinguish between two different yet closely related concepts:
The declared homestead requires the recording of a homestead declaration. This is a document that must contain certain statements by law, including a statement that the declared homestead is the principal dwelling of the declared homestead owner. Other statements are required as well.
Please continue reading to learn more about the homestead exemption as well as the declared homestead.
|WHAT IS THE HOMESTEAD EXEMPTION?|
An exemption is available for your "homestead". This exemption, called the homestead exemption, protects a certain dollar amount of the equity in your homestead from judgment creditors.
The definition of "homestead" is found in California Code of Civil Procedure section 704.710. This definition makes the homestead exemption available for your house under the following certain conditions:- First, the house is your principal dwelling.
- Second, you, as the judgment debtor, or your spouse, resided at your dwelling on the date the judgment creditor's lien attached to your dwelling.
- Third, you or your spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead.
What does all this mean? First, if you have a house but don't live in it (and your spouse doesn't live in it either), you are NOT entitled to the homestead exemption. That means your vacation house on the lake doesn't qualify! Second, even if you currently live in your house, you must have been living there when the judgment lien attached to your house. Third, assuming you have been living there the whole time, you cannot move out before the court determines that your house is in fact your "homestead." If you have always lived in your house and continue to do so, your house should be considered your homestead, and you should be entitled to the exemption.
|HOW MUCH IS PROTECTED BY THE "HOMESTEAD" EXEMPTION?|
California Code of Civil Procedure sections 704.720 - 704.730 provide the exemption along with certain dollar amounts depending on your situation. Make sure to read these code sections if you are interested in knowing what you qualify for. By way of example, an unmarried individual under age 65 with no dependents or disabilities is entitled to an exemption of $75,000.
To understand the usefulness of this exemption, lets take a look at a hypothetical example:Example: Suppose you are an unmarried individual. Someone sued you and obtained a judgment against you for $225,000. You own a home worth $400,000, but you owe $300,000 on the home loan. This means your home equity is equal to $100,000. The judgment creditor files a judgment lien against your house and proceeds with trying to force the sale of your house in order to collect on his judgment. Assuming he succeeds, first the home loan will get paid. Then you will get your $75,000 exemption. The remaining $25,000 of equity will go to the judgment creditor who will still be owed $200,000. Because of the exemption, you get most of your equity even though your judgment creditor has not been paid in full. You are entitled to this exemption even if you do not file any paperwork. Therefore, there is no form to record for this exemption. HOWEVER, if a judgment creditor is trying to sell your house, you will need to appear in court and prove, among other things, that the house is in fact your homestead. Also, if your home is considered personal property (like a mobile home) you must file other paperwork. So do not think that your rights will be protected without any effort on your part.
|WHAT IS A DECLARED HOMESTEAD?|
|A "Declared Homestead" is defined as that dwelling described in a homestead declaration (California Code of Civil Procedure section 704.910). Thus, to have and obtain the benefits of a declared homestead, you must execute a "Homestead Declaration" that complies with the law. It must be properly signed, notarized, and recorded in the appropriate county recorder's office.|
|WHAT IS A LEGAL DESCRIPTION ?|
You can quickly and easily prepare a HOMESTEAD DECLARATION using the . In doing so, you will need to enter the address and legal description of the property which you wish to declare as your homestead. While you will certainly know your address, the legal description is a bit more complicated.
You can find the legal description of your property on the deed to your house. You should be able to find your deed in the stack of papers you were given when you first bought your house. If you can't find your deed, you can obtain a copy from the county recorder's office.
The legal description of a single family residence looks something like this:
The legal description of a condominium looks something like this:
When you find the legal description of your property, make sure to enter it into the exactly as it appears on your deed. IF YOUR DEED REFERS TO AN EXHIBIT "A", YOU WILL NEED TO COPY THE LEGAL DESCRIPTION FROM THAT EXHIBIT "A". DO NOT ENTER A REFERENCE TO AN EXHIBIT "A" INTO THE .
IF YOUR LEGAL DESCRIPTION IS LONG (OVER 1500 CHARACTERS), DO NOT ENTER IT INTO THE BOX. YOU CAN JUST MAKE A COPY OF YOUR LEGAL DESCRIPTION AND ATTACH IT AS EXHIBIT "A" TO YOUR HOMESTEAD FORM AFTER PRINTING.
|WHAT IS AN ASSESSORS PARCEL NUMBER|
|Every property can be identified by a unique parcel number. This number is also found on your deed and usually consists of 10 digits in the following fashion: 1234-123-123. You must enter this number into the .|
|WHAT ARE THE BENEFITS OF A HOMESTEAD DECLARATION?|
The main benefit is that if you voluntarily decide to sell your house, the equity upon sale is protected up to the dollar amount equal to your applicable homestead exemption, for up to six months, for reinvestment in another homestead. For example, if your homestead exemption allows you an exemption up to $75,000, then when you sell your house, your equity from the sale will be protected from judgments in the amount of $75,000 for up to six months. To better understand this benefit, consider the following change to the above example:
Example: You still have a judgment against you. You have NOT recorded a declared homestead. However, instead of the judgment creditor forcing the sale of your house as in the above example, you decided to voluntarily sell your house. First the home loan would get paid just like above. However, next to get paid would be the judgment creditor - in the amount of $100,000 - you would not get anything! You have lost all your equity. However, if you had recorded a declared homestead, then you would get $75,000 from the voluntary sale of your house. Your $75,000 would be safe for up to six months.
During the six months, you can reinvest your protected proceeds from the sale in another house and file a new declared homestead for that new house. Your protection would run from the date of your original declared homestead. This process does not prevent the judgment lien from attaching to the new house if the judgment lien is also recorded in the county in which the new house is located.
If you owned another property and declared that other property as your homestead during the six month period, the proceeds are no longer protected. Also, if you do reinvest the proceeds in another homestead within the six months, the proceeds will no longer be protected.
A similar benefit of the declared homestead exists in the case your house is sold at foreclosure sale. If you can't make your monthly mortgage payments, the bank will forecloses on your house. Unless you have declared your homestead, the homestead exemption does not operate to protect some equity from judgment creditors in the event of a foreclosure sale. Thus if there is a judgment lien against your house, at a foreclosure sale, the judgment lien will get paid before you. However, if you record a homestead declaration before the judgment lien is created, then your equity will be protected through the foreclosure sale up to the applicable exemption amount for up to six months.
PLEASE REMEMBER, RECORDING A HOMESTEAD DECLARATION DOES NOT AFFECT A CREDITORS RIGHT TO TRY AND FORCE THE SALE OF YOUR HOUSE. IT IS NOT AN ABSOLUTE PROTECTION FOR YOUR HOMESTEAD, BUT IT WILL PROTECT SOME OF YOUR HOME EQUITY.
|WHEN SHOULD I RECORD A HOMESTEAD DECLARATION?|
|As you may have gathered from the information above, the Homestead Declaration should be recorded BEFORE a judgment lien is created. In order to play it safe, this means that it should be recorded even before a judgment is obtained against you.|
|HOW DO I ABANDON A DECLARED HOMESTEAD?|
The two most common ways of abandoning a declared homestead are either 1) through the use of a declaration of abandonment, or 2) by operation of law.
A declaration of abandonment must be prepared in accordance with California Code of Civil Procedure section 704.980.
A declared homestead is abandoned by operation of law when the declared homestead owner records a new homestead declaration on a different property. This abandonment only affects the declared homestead owner that is named in the new homestead declaration. Thus, to the extent the prior homestead remains valid, it is not considered abandoned.
|THINGS TO CONSIDER|
Although the homestead exemption is available for dwellings other than real property, the Declared Homestead is only available for real property dwellings. For example, you cannot record a Homestead Declaration for a boat or mobile home.
NO PROTECTION AGAINST CERTAIN JUDGMENTS
The Declared Homestead does not provide any protection against judgments for child, spousal, or family support.
POWER OF ATTORNEY
You, as the homeowner, may have the Homestead Declaration signed by someone to whom you have given a power of attorney. In that case, the Declaration must contain certain additional language and information not provided by this form. Therefore, if you desire to do this, do not prepare your form using this website.
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The material above is NOT a complete explanation of the law regarding the form's subject matter -- it only provides specific legal information regarding the associated form. It is not intended to provide information outside the scope of the associated form. It is intended to explain only certain legal concepts in simple terms in order to help the reader understand what the form is for and how it's generally used.
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