An automatic homestead in California is a legal protection that shields up to $600,000 of equity in your home from creditors.
It is automatic because you do not need to file any paperwork to claim it. All homeowners who occupy their primary residence in California are eligible for the automatic homestead exemption.
The automatic homestead exemption protects your home equity from forced sales by creditors, such as in the event of a bankruptcy or judgment. However, it does not protect your home equity from voluntary sales or from creditors who have liens on your home, such as mortgage lenders.
To qualify for the automatic homestead exemption, you must:
- Be a California resident.
- Occupy your home as your primary residence.
- Have a valid homeowner’s insurance policy.
The amount of equity that is protected by the automatic homestead exemption is based on the median housing price in your county. For example, in 2023, the automatic homestead exemption is $300,000 in counties with a median housing price of less than $600,000, and $600,000 in counties with a median housing price of $600,000 or more.
If you have more equity in your home than the amount protected by the automatic homestead exemption, you may want to consider filing a declared homestead. A declared homestead is a legal document that you record with the county recorder’s office. A declared homestead can protect up to $1 million of equity in your home, and it also protects the proceeds from the sale of your home for six months after the sale.
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.