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Category: Bankruptcy Law
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Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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If one gets sued, what are the chances of loosing ones primary

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If one gets sued, what are the chances of loosing one's primary home?
For the purpose of calculation of home equity, if one has a HELOC do we consider
the equity line or the actual equity line used?
For eg if the line is 150K and the actual balance (line used) is only 10K, would 150K be subtracted from the home equity or just the 10K?


If you are sued by a creditor, the chances the judgment becomes a lien and that lien forces a sale of a home is rare.


in terms of home equity, the balance left of the equity line, has to be subtracted from the equity to calculate the actual equity of the home,


if the 150,000 is the line and only 10,000 was used only 10,000 is subtracted from the equity.

Customer: replied 3 years ago.

If the home equity is high and if there are no other assets, would creditor still force the sale of the primary home?


Regarding the equity line of credit, how would the creditor know what's the balance used up? I have a 150K HELOC and am thinking of refinancing and taking a higher HELOC - 250K so that the home equity gets reduced and could prevent the sale of the home by the creditor, Is this a good idea or not?

Though there's no danger of getting sued, I would still try to protect assets as much as possible.


What's the homestead amount for a primary home in California?

I assume this can be subtracted from the home equity.

they would be able to know as the balance of the equity loan should be listed, however in terms of a foreclosure, your best protection would either create a larger mortgage or change the deed of the home to a trust or corporation to avoid collections.
Customer: replied 3 years ago.

I have already put the home into an revocable trust. But I heard that this won't offer any protection.


Do you know how much is the homestead coverage in California?

Myself, my wife, my son (who is over 21 years) and my 17 year old daughter live in the house.

Putting the home deed in a trust should avoid an automatic judgment on the property as well as the homestead protection in CA. If you have a HELOC that will cover the equity, that would help as well.

you are sued in court and lose, the person who sued you may try to force the sale of your home to collect their money. A homestead makes it harder for them to do this.

A homestead protects some of the equity in your home. If your home is worth more money than you owe on it, you have equity. For example, if your home is worth $350,000 and you owe $300,000, you have $50,000 in equity. A homestead can protect the $50,000.

There are two types of homesteads, automatic and declared.

If you live in the home you own, you already have one. It protects some of your home equity until you sell your home. You do not have to sign or file anything to have an automatic homestead

What is a declared homestead?

A declared homestead is a legal form that you record with the Registrar-Recorder’s office. A declared homestead protects some of your equity for six months after you sell your home if the following three conditions are all true:

You sell your home and buy another home within six months;
The protected amount is used to buy another home;
You record a homestead on the new home.
Only the home you live in qualifies for a homestead.

Who needs a declared homestead?

If you’ve been sued in court, lost, and have a large money judgment against you, a declared homestead can help. If you sell your home, it protects some of the proceeds for six months. This gives you time to buy another home and record another declared homestead.

How much does a homestead protect?

Both automatic and declared homesteads protect the same amounts:

$75,000 for an individual;
$100,000 if the homeowner lives with at least one family member who has no interest in the house;
$175,000 if the homeowner is 65 years of age or older, or is physically or mentally disabled;
$175,000 if the homeowner is 55 years of age or older and single with an annual income of $15,000 or less;
$175,000 for a married couple with a combined annual income of $20,000 or less;
A homestead does not protect you against:

Foreclosure of your home by mortgage lender if you are behind on payments. (See our tipsheet, Foreclosure);
The enforcement of a mechanic’s lien;
A judgment for child or spousal support.
with the homestead protection and taking a larger balance your equity should be protected.

If you have any further questions please do not hesitate to ask.

If satisfied please provide us with positive feedback, thank you
Customer: replied 3 years ago.

I am sorry my last response didn't get posted.


I was asking if it's worth obtaining a declared homestead.

If so, what's the process and how much would it cost?

Does it have to be renewed often?

It is worth it, the fee is $25 and you can do it through the state website linked above.
Customer: replied 3 years ago.

If the primary home is in a revocable trust, do I need to take the home out of the trust before I file homestead declaration?


Where can I find any good company that offers the homestead declaration services?


you may have to take it out of the trust to declare the homestead, however it is not certain as that is California law specific.

You can search online, there are numerous homestead companies, I would hire a local attorney to file it for you as that is your best option to have it done correctly.
Customer: replied 3 years ago.

Thanks for all the info on the homestead declaration.

One final question on the HELOC. If I would like to reduce the equity on the primary, do you recommend taking out the cash advance for the full balance? If I do that wouldn't the cash become an easy target to the creditors, in case of a lawsuit?

the cash could be taken to pay a creditor is deposited in an account, however you may want to consider trying to put assets in a Corp such as an LLC, and that may be best to avoid a creditor, an LLC is a corporation and treated as a separate entity.
Customer: replied 3 years ago.

I do have an LLC with just 2 members - myself and my wife. This LLC was incorporated in California. Would this offer full protection against would be creditors?

that is a good way to protect assets as they are considered separate.
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