Owning a home is a dream that can come to an abrupt end when you get into debt. Homes are prime assets that collectors target to satisfy outstanding debts. Practically every homeowner seeks to avoid this. Luckily, the state provides legal protection in the form of a homestead exemption. This law can help you keep some of your home’s equity when you’re in economic distress.
The General Purpose of Homestead Protection
Homestead protections are most commonly used when a person undergoes bankruptcy. The homestead law allows the debtor to preserve some equity from the debt collection process. The state of Utah defines “property” in Title 78B, Chapter 5, Part 5, Section 503. In this section, property is defined as a primary residence, real property or an equitable property interest awarded through divorce. Utah law treats each class of property differently when it comes to the amount that can be covered under the homestead protection.
How Much Can Be Protected
Unlike Utah, some states use acres as a measurement for the homestead exemption limit. Utah uses monetary amounts to define how much a homeowner can protect. For a primary residence the homeowner can exempt up to $30,000 of the property value. If the real property is not a primary residence the limit is $5,000.
There are a few other situations where a homeowner can claim a homestead. First, a homestead exemption can be used where there are more than one properties together and improvements or appurtenances exist. Second, it can be claimed for a residential mobile home.
Also, specific rules apply when the property is owned jointly. A joint interest in a non-primary residence is limited to $10,000 per household. For a primary residence the total household exemption cannot exceed $60,000.
How to File for a Homestead Exemption
In order to start the process for a homestead exemption you must file a homestead declaration. This document needs to be filed with your local county recorder. The declaration must contain an explanation of why the declarant is entitled to the exemption, a description of the property, the estimated value of the property and an amount to be claimed. If a homestead declaration is not filed correctly a third party can purchase the property free of any homestead claim. Due to this, it is important to consult with a real estate lawyer before beginning the process.
If you are filing bankruptcy and need help protecting equity in your home, contact the Provo law office of Rex B Bushman. An experienced real estate attorney can help determine if you qualify for the homestead exemption, and help you complete all the requirements.