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Homestead Law Shields Owners in Debt

February 26, 1987|JEFFREY S. KLEIN

Several years ago, a colleague of mine, fearing that his law practice was about to go "belly up," filed a homestead form on his house.

No, he was not a frontier rancher trying to lay claim to federal land. He was hoping to protect his home from a forced sale in the event he couldn't pay his debts.

One reader has asked for a simple explanation of the law of homestead. Basically, it is an idea, established and protected by the state Constitution, that says you shouldn't have to give up your home to pay your debts. Or put another way, your creditors shouldn't be able to throw you out of your home just because you haven't paid your bills.

Sale Still Possible

Actually, homestead protection will not necessarily stop a forced sale of your home, but it will protect some of your investment, from $30,000 to $55,000, depending on such factors as age and marital status.

In 1983, the state Legislature passed a law making some homestead protection automatic, although many lawyers still advise it is best to file a "Declaration of Homestead" form with a county recorder's office.

Homestead protection guards some of the investment in your home against most claims. You are not protected against claims for child support, alimony, mechanics' liens, taxes and voluntary liens, such as the bank's mortgage on your home.

If you are single, the amount protected is $30,000. It is $45,000 for married couples and even more for older or disabled persons.

In today's real estate market, with the average home worth more than $100,000, that is not a great deal of protection, so a creditor who has obtained a legal judgment against you could still possibly force the sale of your home.

In order for the sale to go through, you must have more equity in the home than the amount of your homestead protection, and then that excess can be used to pay off the debt.

In other words, if you have $30,000 in homestead protection, a $70,000 first trust deed (for a total of $100,000), but your house is worth $125,000, then there is an extra $25,000 that may be available for your creditors.

In order to obtain the homestead protection, you must reside in your home. You can't claim homestead protection in a vacation home or one where you don't live.

Only individuals can claim homestead protection, not corporations.

This column is only a brief, basic summary of the law of homestead. If you are thinking of filing a homestead declaration, you should probably do more research on your own.

For instance, for some people with an already-bad credit rating, filing a homestead claim may make it more difficult to obtain certain kinds of loans. The book "Homestead Your House" by attorneys Ralph Warner, Charles Sherman and Toni Lynne Ihara is a helpful guide. After doing your own research, if you have any questions, you should consult an attorney.

Legal Brief

Don't litigate--mediate. That is a slogan all lawyers should be required to repeat 10 times before they file a lawsuit. But it also happens to be the title of a new 24-minute videotape produced by the Neighborhood Justice Center in Santa Monica.

If you are interested in having the videotape shown to your community organization, contact Loretta Francesco at (213) 451-8192. The Neighborhood Justice Center is sponsored by the Los Angeles County Bar Assn.

Attorney Jeffrey S. Klein, The Times' senior staff counsel, cannot answer mail personally but will respond in this column to questions of general interest about the law. Do not telephone. Write to Jeffrey S. Klein, Legal View, The Times, Times Mirror Square, Los Angeles 90053.

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