The Homestead Exemption in California protects $75,000 for a single person and $100,000 for a couple. For the elderly or disabled, the homestead swells to $175,000.
Under California law, declared homestead exemption and automatic homestead exemption are separate and distinct protections that operate differently. In re Mulch, Bkrtcy.N.D.Cal.1995, 182 B.R. 569.
Under California law on homestead exemption, automatic homestead attaches to principal dwelling of each homeowner in the state, and homeowner need not file any record to obtain its protection; however, a "declared homestead” does not attach automatically but requires homeowner to record declaration in office of county recorder where property is located. In re Mayer, Bkrtcy.S.D.Cal.1993, 156 B.R. 54, affirmed in part and vacated in part.
Most significant difference between California automatic homestead exemption and declared homestead exemption is that declared homestead entitles debtor to exemption upon voluntary sale of homestead property and proceeds remain exempt for six months; this allows debtor to reinvest proceeds in another residence. In re Mulch, Bkrtcy.N.D.Cal.1995, 182 B.R. 569. Furthermore, Debtors are not required to file a claim of exemption pursuant to CCP § 484.070(a), prior to the hearing on plaintiffs' application for a writ of attachment against the residence.
Exemption does not prohibit a sale of a dwelling. The exemption does not prevent a foreclosure sale of a voluntary lien such as a deed of trust, and it does not prevent the involuntary sale of a homestead by creditors when the property has sufficient equity. It merely assures the homeowner that before the property will be sold he or she will receive the amount of the exemption that can be used to acquire another residence, and until the new residence is acquired, the funds will remain exempt. Therefore, when the homestead can be sold for an amount in excess of the debts secured by liens on the property plus the homestead exemption, the property can be sold by an execution sale.
California's homestead is intended to be read broadly with construction strongly in favor of debtor. Haaland v. Corporate Management, Inc., S.D.Cal.1989, 172 B.R. 74.
SUMMARY
You do not have to do anything to take advantage of the homestead exemption. The declared and recorded homestead exemption does provide further extended safeguards during a voluntary sale of the homestead. In short, by using the declared homestead exemption the creditor must get a writ of attachment before you must take further action in exercising the homestead exemption.
As a caveat. The homestead exemption is not a complete block to repelling a creditor and only buys time in delaying the process but preserves the right to some of the equity in an involuntary foreclosure. In other words, this is a toothless strategy.
