What is a "Homestead ?"

In our video below, we provide a primer on the California Homestead Exemption and what you need to know for your bankruptcy case

Video Transcript

Good morning to all of those interested in learning a little bit more about bankruptcy, this is Dan Wiedecker with the Debt Relief Legal Clinic. 

Today we are going to talk for a few moments about the homestead exemption. In a prior video, we talked about what an exemption is, which is the ability of state law to protect certain property from judgment predators, both outside and inside of bankruptcy. 

Today we are going to talk for a few moments about what a homestead exemption is. This is a very common question, especially for those folks who already own a home or those looking to buy a home. 

Homestead law dates back to a law that was brought over from England to ensure that family members upon passing of another family member had access to their place to live. If it was owned by a husband and the wife and the child who weren't able to take title, back then, had ability to keep that homestead. That law is present in all 50 of our states. 

The implementation is state-specific. In the state of California we were fortunate to recently have the law changed to allow for the homestead up to $600,000. So that is equity in a homestead.

There is a misconception in any bankruptcy context that you get to keep your home using the homestead irrespective of a home loan. That is patently incorrect. It's an urban legend and not true. 

If you have a lien against your home by a financier, whether you used it for purchase or refinanced to do home improvements, they typically have filed a lien against the property and they're in first position to foreclose and a homestead does not protect against those voluntary liens.

Involuntary liens are what we're talking about in the context of judgment predators. The homestead, what it does, whether it's automatic or declared, which is another distinction in California, gives you protection from judgment predators. 

So in a bankruptcy case, if you pick the homestead protection because you do have a home, you can protect up to $600,000 in equity. But if you do have a loan against that home you voluntarily took out, you need to make sure you make those payments. 

The difference between an automatic homestead and a declared homestead simply put, automatic applies automatically that if your home were to sell in a forced sale like a foreclosure or a trustee sale in a bankruptcy, you have automatic protection to a certain dollar amount. 

Declared homestead applies when you want to voluntarily sell your house yourself inside bankruptcy, you must declare your homestead. And that's a simple 1-2 page document that you file. You execute, you have notarized, and you file within your state's county. And that protects you if you want to sell your home and keep the equity beyond judgment predators. 

If you have any questions, this is a very complicated area of law that we make simple because we do it everyday. Please reach out for a consult