Misconception about the Declaration of Homestead
The Declaration of Homestead Act basically allows a homeowner to protect up to $500,000 in equity in their home against creditors. The home must be the homeowners primary residence.
I have recently run into a situation where homeowners are stunned that creditors have filed a lien against their home, and say to me"I have a Homestead on file they can't do that". The Declaration of Homestead, does not prevent a creditor from slapping a lien on your home nor wipes out the obligation of the debt. It does protect the equity in your home, either from your home being forced to sell or on the execution of a sale. Your homes equity may be protected but having a lien slapped on your home can be cumbersome to be removed if you are trying to sell. (It has recently come up in two short sale situations, where creditors find out the home is being sold)
There are certain types of liens that are exempt from the Declaration of Homestead:
- Federal, state and local taxes, assessments, claims, and liens;
- Mortgages
- An execution issued from the Probate Court to enforce its judgment
that a spouse pay for the support of a spouse or minor children;
- Building where the land is rented
- Upon an execution issued from a court of competent jurisdiction to
enforce its judgment based upon fraud, mistake, duress, undue influence
or lack of capacity
- Debts contracted prior to the acquisition of the homestead
If you are purchasing a home or do not have a Declaration of Homestead, it is a good idea to file one. There are no down sides at all to have one on your home.
Form for the Declaration of Homestead.