Monday, November 5, 2012

California Homestead Exemption: Automatic vs. Declared


The HOMESTEAD DECLARATION is document that is used to declare your homestead and thereby obtain certain protections for some of the equity that may exist in your home.
Under California law, homeowners are entitled to protection of a certain amount of equity in their home. The amount protected varies depending on the age, marital status, and income of the property owner.

The homestead exemption does not prohibit the sale of the property. The property can be sold if the sale would produce enough money to:
  • Pay all existing liens on the property
  • Pay off all mortgages and loans secured by the equity in the home
  • Pay the costs of selling the home
  • Allow the homeowner to keep equity in the amount protected by the homestead exemption
Rather than prohibiting the sale, the homestead exemption merely ensures that the homeowner receives the amount of the exemption before the creditors are paid from the sale proceeds. The exempt funds received from the voluntary sale of the property remain exempt from debt collection attempts for six months, and can be used to purchase another residence.

The homestead exemption does not apply in the following situations:
  • Judgments obtained prior to the recording of the homestead declaration
  • Debts secured by encumbrances on the premises executed by the owner before the declaration was recorded
  • Obligations secured by mechanics' liens on the premises
  • Voluntary encumbrances on the premises, such as mortgages or deeds of trust
  • Judgments for child, family, or spousal support 

There are two types of Homestead Exemptions:
Automatic: applies only upon forced sale of the property. The automatic exemption requires continuous residence from the date the judgment creditor's lien attaches until the date the court determines that the dwelling is a homestead. If a creditor attempts to sell the home, the burden of proof is on the homeowner to prove to the court that an automatic homestead exemption exists.
Declared: applies both to forced and voluntary sales of the property. Exempt proceeds from a voluntary sale are protected if another home is purchased within 6 months. Homeowners must reside in the dwelling on the date the homestead declaration is recorded. If a creditor attempts to sell your home, the bu
rden of proof is on the creditor to prove to the court that your homestead declaration is invalid.

The homestead exemption applies only when certain requirements are met. These requirements, described in CCP 704.710, are:
  1. The residence must be the principal dwelling of the judgment debtor or his or her spouse.
  2. The judgment debtor, or their spouse, must reside at the dwelling on the date the judgment creditor's lien attached.
  3. The judgment debtor and/or their spouse must reside continuously thereafter until the date of the court determination that the dwelling is a homestead.
Eligible properties:
Homestead exemptions are available for a variety of dwelling types.  "Dwelling" means a place where a person resides and may include but is not limited to the following:
  1. A house or mobile home, together with the outbuildings and the land upon which they are situated.
  2. A boat or other waterborne vessel.
  3. A condominium, as defined in Section 783 of the Civil Code.
  4. A planned development, as defined in Section 11003 of the Business and Professions Code.
  5. A stock cooperative, as defined in Section 11003.2 of the Business and Professions Code.
  6. A community apartment project, as defined in Section 11004 of the Business and Professions Code.
Amount of exemption:
The amount of the exemption varies, depending on the age, marital status, and income of the property owner. Under CCP 704.720 - 704.730, the exemptions are:
  1. $75,000 unless the judgment debtor or their spouse who resides in the homestead is a person described below in (2) or (3)
  2. $100,000 if the judgment debtor or spouse is a member of a family unit (see definition below*), if at least one member of the family unit owns no interest in the homestead, or has only community property interest in the homestead with the judgment debtor.
  3. $175,000 if the judgment debtor who resides in the homestead is at the time of the sale  either (a) a person 65 years old, (b) a person physically or mentally disabled and as a result of that disability unable to engage in substantial gainful employment, or (c) a person 55 years old with a gross annual income less than $15,000, or, if the judgment debtor is married, a gross annual income, including that of the spouse, of not more than $20,000, and the sale is involuntary.


California Code of Civil Procedure sections 704.720 - 704.730 provide the exemption along with certain dollar amounts depending on your situation. Make sure to read these code sections if you are interested in knowing what you qualify for. By way of example, an unmarried individual under age 65 with no dependents or disabilities is entitled to an exemption of $75,000.

 California attorney Marlene S. Cooper writes in The Pasadena/San Gabriel Valley News Journal:
  • In these days of rampant debt faced by many of us, protecting the family home through a declaration of homestead could take on new significance.

    When financial obligations go unpaid, a person's creditor can go to court to seek payment of the debt. If a judgment is obtained against the debtor, the creditor can then file a judgment lien against the person's real estate, including the debtor's personal residence.

    Many times unsecured creditors simply wait for the house to be voluntarily transferred (or re-financed) and collect on the debt from the escrow proceeds; however, sometimes the house is sold involuntarily in foreclosure by the holder of a trust deed on the property or a sale is forced in execution of a money judgment.

    Homestead laws are designed to protect the sanctity of the family home against a loss caused by a forced sale of the home by creditors. It can ensure that insolvent debtors and their families are not rendered homeless by virtue of an involuntary sale of the residential property they occupy.

    The [California] homestead exemption can be obtained in two ways: (1) the automatic homestead exemption granted as a matter of law to every homeowner, and (2) an express declaration of homestead by the homeowner which is notarized and recorded with the county recorder.

    The amount of the exemption may be $50,000, $75,000 or $150,000 according to which statutorily-defined class of persons the homeowner falls into. The amount of equity protected is the same for each type of homestead exemption; however, they operate quite differently in terms of the protection afforded.

    The declared homestead provides much greater protection for the property owner than the automatic homestead.

    With the automatic homestead, the homeowner['s equity] is protected in the event of a forced foreclosure sale but not a voluntary sale. With the declared homestead, however, the exempt proceeds from a voluntary sale may be reinvested within six months, thus allowing the debtor to invest in another residence.

    With the automatic homestead, judgment liens attach to all interests in the property that are subject to the enforcement of money judgments. For the declared homestead, however, a judgment lien filed after the declaration of homestead can only attach to equity in an amount greater than the homestead exemption and any preexisting liens on the property.

    Another important distinction is that the declared homestead survives the death of the homestead owner whereas the automatic homestead does not.

    A Declaration of Homestead form can be purchased at office supply or legal stationery stores. For those who are internet savvy, the form can also be downloaded from the Registrar-Recorder's website in the real estate section ( The fee to have the Declaration notarized and recorded is approximately $25.00. There is certainly nothing to lose but much to gain by taking the simple step of filling out and recording the declaration.

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