Whether you are facing a foreclosure sale of your home or just need protection from a relentless creditor that is attempting to enforce a judgment against you, there are several important benefits to filing a Homestead Declaration in California. Now it is true that under California law you are entitled to an automatic homestead exemption. So why would you need to file a Homestead Declaration? Many people are surprised to learn that there are important benefits to recording a Homestead Declaration that provide for additional protection in bankruptcy, benefits that you do not receive with the automatic homestead exemption.
Benefits of Filing a Homestead Declaration in California
A homestead exemption refers to the amount of equity in your home that is protected in bankruptcy cases. A homestead exemption gives you the same amount of protection, even if you have not filed a Homestead Declaration. This is because the exemption is automatic. You get the exemption automatically, by operation of law, just by virtue of the fact that you own a home and reside there. But there are other benefits to filing Homestead Declarations, other than simply being able to exempt a certain amount of equity in your home.
Abstract Will Not Create Judgment Lien Unless Surplus Equity Exists
One of the most important reasons for recording your Homestead Declaration in California is that if an abstract of judgment is filed against you, the judgment lien will not attach to your property, and will not even create a judgment lien, unless there is surplus equity over and above the homestead exemption amount. In contrast, if you did not have a recorded Homestead Declaration, the judgment lien would immediately create a lien and would attach to any equity upon being filed with the County recorder.
Can Sell and Keep Proceeds, If Reinvest
Another big advantage is that if you sell your home, your proceeds, up to your homestead exemption amount, are protected from judgment creditors if you reinvest the proceeds into another homestead within 6 months, and provided certain conditions are met.
Can Keep Proceeds If Property Sold In Bankruptcy Cases
Similarly, in San Diego bankruptcy cases, if the trustee appointed to your case wanted to sell your property to pay creditors, you would be entitled to the same protection as if you were to voluntarily sell your home, and provided certain conditions are met.
Can Sell Property In Chapter 13 and Keep Proceeds
If you want to sell your home in a Chapter 13 repayment proceeding, the San Diego bankruptcy trustees will require that your attorney provide a copy of a properly recorded homestead declaration before any proceeds of the sale are released to you. (If there is no equity in your property, then you would not need to be concerned with protecting proceeds of sale, since there wouldn't be any proceeds.)
Can Play a Crucial Role in Helping You Get Out of Debt
There are other advantages to filing a Homestead Declaration in San Diego bankruptcy cases. Recording your Homestead Declaration may play a crucial role in helping you get out of debt San Diego and protect the equity in your home. You should discuss with an experienced attorney whether filing the homestead declaration before bankruptcy would be beneficial for your case.