How to Protect Your Home Equity From Creditors

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Do you have a house?  Do you know that your house can be protected from the claims of some general creditors?  I know that in the United States, there is a law, called Homestead Law, that will protect the primary residence of homeowners.  There might be also similar homestead law in other countries.

To give you an idea on how to protect your primary home from the claim of some creditors, let me discuss with you the Homestead Law of the State of Nevada in the United States.  These are procedures to be followed:

1.  Bring with you the real estate documents showing the legal description of your property, assessor's parcel number and property address.

2.  Go to the City Assessor's Office.  Each city in Nevada has its own Assessor's Office.

3.  Tell the Assessor's Clerk that you want your home to be protected from creditors.  The Clerk will give you a form called Declaration of Homestead (see sample form below).

4.  Fill out the Declaration of Homestead form in one copy only.  Verify the accuracy of the information on the form.

5.  Give the completed Declaration of Homestead form and the fee of $17.00 to the Clerk.

6.  The Clerk will record the Declaration of Homestead, stamp it with the date and time of receipt, photocopy it and give your receipt for the $17.00 and the original copy of the Declaration of Homestead to you.

Note:  The equity on your primary home is already protected from some creditors starting on the date and time your Declaration of Homestead form is recorded.

Facts - Homestead Law in Nevada

1.  Only the primary residence can be recorded with the Assessor's Office.  If you have more than one home, the other homes cannot  be recorded under the Homestead Law.

2.  Only up to $550,000 equity on the primary residence is protected under the Homestead Law.

Let's say, the market value of the first home is $800,000.  The homeowner has a first mortgage loan of $350,000 and a second mortgage loan of $75,000 or a total of $425,000 in mortgage loan.  The home equity is $375,000 which some of the creditors cannot claim.

Let's say, the market value of the first home is $800,000.  The homeowner has a first mortgage loan of $100,000 and a second mortgage loan of $25,000 or a total of $125,000 in mortgage loan.  The home equity is $675,000.  In this case, the first $550,000 is protected by the Homestead Law but the excess of $125,000 will be claimed by creditors.  To claim for the $125,000, the creditors will force the homeowner to sell the primary residence or pay the $125,000 from other sources and keep the primary residence.

3.  Any homeowner who records a primary home under the Homestead Law can terminate anytime the recording of such home for any reason.  Another form will be filled out and submitted to the same City Assessor's Office to "abandon" an existing homestead.

4.  In Nevada, the home equity of up $550,000, if covered under the Homestead Law, is legally protected from creditors for unpaid medical bills, revolving credit cards, business and personal loans, and accident liabilities.

5.  The Nevada Homestead Law does not protect homeowners against debts secured by a mortgage or deed of trust, payment of taxes, Internal Revenue Service (IRS) liens, mechanic's lien, child support and alimony payments.

Last Words
If you have a primary home, I suggest that you protect your home equity under your state's or country's homestead law as soon as possible to have piece of mind.

You may use the search box below to search the words: (your state or country) + assessor + homestead law to find out where you will inquire about your own homestead exemption.  Thank you for reading this blog and come again.

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