Legal Question in Real Estate Law in California

Re: Homestead Declaration

Filing a homestead declaration effects the burden of proof if a judgment creditor wants to sell you home to enforce a judgment. You are already entitled to the homestead exemption under the law, but there is no harm in filing the declaration.

If they sue you and win and you don't have enough insurance, they can legally go after you home. The process is rather expensive and cumbersome, so the more likely outcome is that they will put a lien your home and wait for you to sell or refinance.

You might want to consider consulting a bankruptcy attorney if you risk having a big judgment entered against you.

Re: Homestead Declaration

This is a good summation taken from a case:

In California, a homestead exemption may be asserted two ways. [3] First, a declaration of homestead may be recorded. (Code Civ. Proc., § 704.920.) A recorded homestead protects the property from execution by certain creditors to the extent of the amount of the homestead exemption. (In re Mulch (Bankr. N.D. Cal. 1995) 182 B.R. 569, 572 [applying California homestead exemption].) [4] Because many California debtors failed to file homestead exemptions, the legislature in 1974 enacted legislation which created an "automatic" homestead exemption. fn. 2 (Code Civ. Proc., § 704.720.) This exemption need not be memorialized in a recorded homestead declaration in order to be effective. "The automatic homestead exemption is available when a party has continuously resided in a dwelling from the time that a creditors' lien attaches until a court's determination in the forced sale process that the exemption does not apply." (In re Mulch, supra, at p. 572; Webb v. Trippet (1991) 235 Cal.App.3d 647, 651.) {Page 112 Cal.App.4th 589}

[5] As noted in In re Mulch, the two exemptions are distinct protections and they operate differently. The declared homestead provides greater rights than the automatic homestead. The declared homestead provides protection from a voluntary sale; judgment liens only attach to the equity in excess of consensual liens; and the protections of the declared homestead survive the death of the homestead owner. The proceeds from a voluntary sale may be reinvested within six months, thus allowing the debtor to invest in another residence. (In re Mulch, supra, 182 B.R. at p. 573.) On the other hand, the automatic homestead only entitles the debtor to protection from a forced execution sale. (Ibid.)