If you are sued in court and lose, the person who sue you may try to force the sale of your home to collect their money. A homestead makes it harder for them to do this, though only the home you live in qualifies for a homestead.
In California, an automatic homestead gives protection against involuntary claims against an owner’s home.
A declared homestead is a legal form that you record with the County Recorder in the county where the property is located.
It protects some of your equity ($75K-$175K) for six months after you sell your home if the following three conditions are all true:
1) You sell your home and buy another home within six months;
2) The protected amount is used to buy another home;
3) You record a homestead on the new home.
A homestead does not protect you against:
– Foreclosure of your home by mortgage lender if you are behind on payments;
– The enforcement of a mechanic’s lien;
– A judgment for child or sponsal support;
– A creditor from garnishing wages.