Is My Home Protected in a Lawsuit?
While educating investors on asset protection throughout the country, one of the key questions that I am often asked is whether or not someone’s home would be protected in an individual lawsuit. Unfortunately, the answer to that question depends greatly on what state you call home and how much equity you have in your primary residence. All states have a "Homestead Exemption" in which the state law, either through statute or case law designates a specified amount of equity that you may have in your primary residence to prevent your home from a forced sale to satisfy creditors. There are five states that provide the greatest level of protection: Florida, Texas, Iowa, Oklahoma and Kansas. In these states you will have virtually total protection regardless of the amount of equity that you have in your property. However, if you do not live in one of these states you are going to have a varying degree of protection. For example, if you live in California, are single, and special circumstances do not exist, your home would not be protected if you had more than $50,000 in equity.Therefore, when determining if your primary residence is going to be protected in a potential judgment situation, you must first determine the amount of equity in your home and then look to the law of your home state.
Comments (1)
Good article. I guess this is another reason to carry real estate debt. I have an LLC but I always wonder just how protection that actually provides.
Justin Pierce, about 15 years ago