Do you know how to protect your home if you get sued? If you’re being sued in court but lose the case, then the party who filed suit against you could try to force you to sell your property homestead to recover their cash. The presence of a homestead can make it more difficult for the defendant to achieve this.
The homestead helps protect some equity you have in your home. If your property is worth more than what you owe then you are entitled to equity. For instance, If your home is worth $350,000, and you owe $300,000. You have equity of $50,000. A homestead could protect $50,000.
There are two kinds of homesteads, automated and declared.
What exactly is an automated homestead?
If you reside in the property that you own, then you have a mortgage. It helps protect some of your equity in the home until you sell your house. There is no need to make any formal declaration or filing in order to obtain an automatic homestead
What is a homestead that has been declared?
Declared homesteads are a form of legality that you file in the office of the Registrar-Recorder. A declared homestead will protect some amount of capital for six months following the time you have sold your house if the following three requirements are true.
You can sell your house and purchase a new home within six months.
The money is used to purchase another house;
You can record a homestead on the new property.
The home you reside in is eligible for the homestead.
Who is in need of a declared homestead?
If you’ve been accused of being sued in court, won, or have a substantial cash judgment against you, declaring a homestead may help. If you decide to sell your home and it is protected by the profits for up to six months. This allows you to purchase another property and to record a new homestead declaration.
How much will the homestead’s protection cost?
Both declared and automatic homesteads cover the same amount:
- $50k for an individual
- $75,000 If the homeowner has at most one family member that does not have a stake in the property;
- $150,000 if the homeowner is 65 or older, or has physical or mental disabilities.
- $150,000 if the homeowner is 55 or older and is single and has an annual earned income of less than $15,000;
- $150,000 for an unmarried couple who earn an annual income of less than $20,000;
A homestead cannot protect you from:
- Foreclosure of your house by the mortgage lender in the event that you are in debt.
- Enforcement of mechanic’s lien
- A judgment for an unmarried child or for spousal support.
- How do I file a declared homestead?
You can declare a homestead in these steps:
- Purchase a homestead declaration form at a stationery store or look for an online form that is generic.
- Fill in the form.
- Fill out the form and have it notarized.
- Contact the office of the Registrar-Recorder in the area in the area where the property is for the filing address and fees.
- Businesses that assist you in filing a declaration of homestead must not be more expensive than $25.