A Simple and Effective Way to Protect Your Home

Think of the word “homestead” and you’ll probably get an image like the one you see to the right. It represents safety, security, where you sleep at night and where you raise your family. So, protecting it is important.

A homestead exemption is a legal way to protect a portion of the equity in your principal residence. Each state with a homestead exemption law specifies a certain dollar value that is exempt from the claims of most creditors. That means even if you have to sell your home to pay off debts, you get to keep a portion of the proceeds. It’s a simple filing in most states – a piece of paper and a minimum fee. Other states assume the exemption automatically, and you don’t need to apply at all.

The amount you can protect will depend on your equity and your state’s laws. If you have $100,000 in equity and your state only allows a $75,000 homestead exemption, that additional $25,000 is at risk. And, where bankruptcy factors in, things get even more confusing. Now you’ve got federal law versus state law to look at. Federal law limits the amount of a homestead exemption if you moved within 3 years & 4 months of declaring BK. But many states don’t allow you to use that amount and limit you to the state rate instead. That rate differs dramatically across the country, from nothing in some states, to an unlimited amount in others.

Plus, you can’t hold all creditors at bay. It doesn’t apply to the IRS and state taxes, to mortgage holders, properly secured mechanics liens, or to any other creditor where you’ve specifically given them an interest in your home.

We’ll be covering the homestead exemption in more detail during our real estate coaching courses in May. Coaching members will also receive a chart detailing homestead exemption information in all 50 states. Click here to learn more about the Coaching Program and sign up.

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• Protect Your Home with a Homestead Exemption
• Safely Taking the Home Office Deduction
• Five Unexpected Benefits of a Home-Based Business
• 5 Stupid Things Home Business Owners Do That Cause an IRS Audit Red Flag
• Want More Money in Your Pocket? Start a Home-Based Business