Definition of "Homestead Exemption"
Through the homestead exemption definition, we understand the legal instrument that provides physical and financial shelter in dire situations. The homestead exemption legal provision can be applied following the death of the homeowner’s spouse or in case of a bankruptcy declaration. Through the homestead tax exemption, surviving spouses can also obtain ongoing property-tax relief on a gradient scale that impacts lower assessed value homes the most.
What is the Homestead Exemption?
Across America, there are many instances where the homeowner is also the main provider for a family. The homestead exemption protects a family from winding up homeless in some of the worst scenarios imaginable. The death of a spouse who, aside from being the homeowner, was also the main provider of a family can shatter families and lives as creditors try to cover their debt without taking into account the family’s trauma.
A family who recently experienced loss or filed for bankruptcy is protected from creditors in these traumatic situations through a homestead exemption. As it covers the home, the homestead exemption provides both a physical shelter and a financial umbrella as the creditors won’t be able to force-sell the family’s primary residence.
However, there is one thing that a homestead exemption can not do. In case the homeowner defaults on their mortgage, the homestead exemption is unable to block a bank foreclosure. In case the possibility of defaulting on a mortgage ever comes up, and the scenario fits, any homeowner should apply for the benefit and check with local government officials to see if they can benefit from it.
How does Homestead Exemption Work?
Only a few states or territories do not provide homestead exemption provisions (New Jersey, Pennsylvania). Still, while the majority can apply it, the level of protection and its application differs by state. Some states grant the homestead exemption automatically, while others require claims to be filed from homeowners.
It is necessary to understand that only the homestead property can be protected from creditors through the homestead exemption. The homestead property is the primary residence property. So, just to clarify, the holiday home is not covered by the homestead exemption. If the surviving spouse changes their primary residence, they must claim homestead exemption again for the new primary residence.
Have a question or comment? We're here to help.