A “homestead” is that portion of a person’s home which is protected from creditors. The amount of the homestead protection varies a great deal from state to state. The famous former football star and murder defendant, O.J. Simpson, resided in Florida, prior to his run-in with the criminal law in Las Vegas, in large part because Florida is one of the few states in the nation to have no limit on the homestead exemption. Mr. Simpson was able to put virtually all of his assets into buying a large home there, and his creditors are not able to reach that home.

California is less generous to homeowners in this respect. The base amount of the homestead, which is protected from involuntary creditors, is $55,000. This amount is raised to $75,000, for families, and to $150,000 for: (1) homeowners over 65 years of age; (2) homeowners 55 or older with incomes below $15,000 a year ($20,000 joint income for two spouses); or (3) homeowners unable to engage in substantial gainful employment due to physical or mental disability. Code of Civil Procedure Section 704.730.

Homesteads do not protect the homeowner from mortgages, deeds of trust or other voluntary liens. They only protect the homeowner from involuntary liens, such as judgment liens. If such a creditor forces a home to be sold, the sale price must be enough to pay: (a) the voluntary liens, such as the deeds of trust and mortgages; and (b) the homestead amount, which is paid to the homeowner. If the sale price is not high to cover these amounts, then the forced sale can not take place.

California has a technical distinction between recorded homesteads and the automatic “residential exemption” which applies to all homeowners. In the past, this distinction was important. At this stage, the law has been amended so as to almost erase the distinction between the two categories. The primary difference at this point is that the residential exemption applies only in forced sales of the property, whereas a recorded homestead also protects the homeowner in voluntary sales of the property.