Homestead Exemptions are often misunderstood and their applications overstated, however, used properly they can save a primary residence from being seized to pay certain types of debts.
It is important to understand that Homestead Acts will NOT protect the family home from being seized to pay a mortgage debt that is secured by that home. Homestead acts only protect equity in an owner occupied property from being seized to pay other creditors that might otherwise try to enforce a lien on the property. Also, Homestead Acts do NOT protect the entire home from being seized, they only protect a certain amount of equity in the property. For example, Nevada law has a maximum Homestead Exemption of $350,000. If John Q. Citizen owns a home free and clear worth $375,000, and owes his credit card company $40,000, they can still place a lien on John's property in order to force a sale that will liquidate his equity in the home. However, once this sale takes place, provided that John has properly registered his home for Homestead protection in the state of Nevada, $350,000 of that sale will be protected for John and the credit card company will only be entitled to the remaining $25,000.
The amount of equity that can be protected under a Homestead Act as well as what must be done by the homeowner to qualify for Homestead protection varies by state. Follow this link for a state by state listing of Homestead Exemptions. http://www.assetprotectionbook.com/homestead_exemptions.htm
When evaluating foreclosure, bankruptcy, or a combination of the two it is important to consider the ramifications of the Homestead Act in your state. Perhaps you are over burdened with debt from credit cards, auto loans, or other sources not related to your primary residence, but you would like to keep your home and could afford the mortgage payments if you were able to eliminate the other debts. Perhaps you have equity built up in your home that you would like to retain. In those cases, you might want to consider filing bankruptcy to eliminate your unsecured debts and using a Homestead Exemption to protect the equity in your property.
Foreclosure Help and Information: Contact us at foreclosureandbankruptcy@gmail.com for referrals to a qualified bankruptcy attorney in your area.
