Q&A: Homestead exemption won't protect owner from nonjudicial foreclosure

"A homestead exemption protects some or all of your home's equity from creditors. Property subject to exemption includes condominiums in common interest developments, single-family homes, mobile homes, and boats. For debtors with multiple homes, only the principal dwelling qualifies, defined as the home where the owner resides when a judgment creditor's lien attaches and where the debtor continuously resided until court determination of homestead status."

"California homeowners receive an automatic homestead exemption protecting equity when a court forces a house sale to pay judgments. The automatic exemption applies only to debtors or their relatives residing in the homestead at the time of judicial foreclosure. The exemption may prevent home sales if creditors cannot prove sale proceeds suffice to repay outstanding liens and the titleholder's exemption amount."

"If a debtor's equity is sufficient to repay outstanding liens and the exemption amount, the judicial foreclosure sale proceeds, but the homeowner receives the full exemption amount for reinvestment in a new personal residence. Homestead exemptions protect against judicial foreclosures but do not protect against nonjudicial foreclosures by homeowners associations."

A homestead exemption protects equity in your primary residence from creditors. California provides automatic homestead exemptions for debtors residing in their homes when a court forces a sale to satisfy judgments. The exemption applies to single-family homes, condominiums, mobile homes, and boats, but only one principal dwelling qualifies per person. The exemption prevents home sales in judicial foreclosures if proceeds cannot cover outstanding liens plus the exemption amount. If equity is sufficient, the sale proceeds, but the homeowner receives the full exemption amount for reinvestment in a new residence. However, homestead exemptions protect against judicial foreclosures only, not nonjudicial foreclosures by homeowners associations.

Read at Los Angeles Times