Expert legal advice and strategic guidance.

Home > Articles & News > The Homestead Exemption by Sean M. Finerty

Articles & News

The Homestead Exemption by Sean M. Finerty

The Homestead Exemption - not to be confused with the Homeowner's Exemption¹ - allows a homeowner to protect a significant portion of their home's equity from creditors. The amount of the exemption varies based on certain factors:

  • $75,000, if the homeowner is single and under the age of 65;
  • $100,000, if the homeowner lives with family in the home;
  • $175,000, if the homeowner is 65 years or older;
  • $175,000, if the homeowner is physically or mentally disabled (regardless of age); or
  • $175,000, if the homeowner is 55 years or older, has low income², and creditors seek to force a sale of the home.

For example, if you're over 65 years of age, and your debt forces you to sell your primary residence, you are entitled to keep $175,000 of the home's equity - regardless of the amount of your unsecured debt. (Keep in mind, though, that the Homestead Exemption does NOT protect you against debts secured by your home, for example, your mortgage or a home equity line of credit. Therefore, if your secured debts exceed the value of your home, you may not be entitled to any sales proceeds). The eligible proceeds will remain exempt for 6 months after sale, and are intended to provide the means for finding and obtaining new living arrangements. But as a practical matter, the Homestead Exemption often discourages unsecured creditors from forcing the sale of your home, knowing that a significant portion of the proceeds will be "untouchable."

The Homestead Exemption is automatic for every homeowner's primary residence, however, there are advantages to affirmatively claiming the exemption for your home by recording a homestead declaration on your property's title. For example, the automatic exemption provides protection only in the case of a forced sale, such as creditor enforcing a judgment lien against the homeowner. However, by declaring your homestead, then the exemption applies to both forced and voluntary sales. In the case of a voluntary sale, a declared homestead will protect your exempt proceeds if you purchase another home within 6 months. Furthermore, in the case of a forced sale, you are eligible for the automatic exemption only if you can prove that the property is your primary residence, whereas a declared homestead presumes such eligibility (thus shifting the burden of proving otherwise on to your creditors).

If you have any questions about the Homestead Exemption or would like to learn more about the benefits of declaring a homestead, please call The Alvarez Firm at (818) 224-7077.

¹The Homeowner's Exemption does not protect against creditors, however, it does provide some tax relief to the homeowner, by exempting $7,000 of the home's value for purposes of determining property taxes.
²Gross annual income of not more than $25,000, or, if married, a combined gross annual income of not more than $35,000.