Homestead Exemption prevents the creditor from selling, damaging or destroying the homestead in order to pay the debt of the debtor.
The word “homestead” means a principal dwelling, where (1) a debtor resided on the date creditor’s lien was attached to the dwelling and (2) a debtor continuously resided in the dwelling until the date of the court determination that the dwelling is a homestead.
Each state has different law as to the amount of homestead exemption. Here, we will discuss the amount only in California.
A Homestead Declaration is Not Required in California.
In California, the homestead exemption is automatic. Unlike other states, the debtor does not need to file a homestead declaration in order to claim the exemption in bankruptcy. However, you may need to file a homestead declaration for judicial liens or process of a voluntary sale of your home.
There are two systems for Homestead Exemption.
In California, there is system 1 and system 2 that defines homestead exemption. System 1 applies to real or personal property where you reside, which can include a mobile home, boat, and etc. In system 1, homestead exemption applies to prevent the process of a forced sale of your home received six months prior to bankruptcy. System 2 applies to real or personal property that the debtor or a dependent of the debtor uses as a residence.
More on Homestead Exemption can be found in the California Code of Civil Procedures § § 704.710, 704.720, 703.140(b)(1) and 704.730.
If you have any questions, please do not hesitate to contact us.