Financial distress can cause individuals any number of difficulties including bankruptcy or foreclosure. When an individual also owns a home, the fear of losing it can feel overwhelming.
There are laws, however, that can help protect a home from the reach of creditors. These are referred to as the “homestead laws.”
Homestead laws are intended to prevent homelessness that may result from tough economic conditions, such as a foreclosure or bankruptcy. These laws allow homeowners (and other property owners) to declare a portion of their real property as a “homestead” that cannot be taken by creditors.
Every state has its own laws and rules governing homesteads and when the homestead law applies. Some states allow mobile homes and condominiums to be eligible for the homestead exemption, others do not. In Georgia, the homestead applies to real or personal property used as a residence, including a condominium or co-op. It does not apply to land owned that is not used as a residence.
What the Homestead Law Does
Homestead laws can help homeowners when it comes to property taxes and foreclosure. With regard to property taxes, Georgia’s homestead laws allow owners to take a tax exemption, if he or she owned the residence on Jan. 1 of the taxable year. The standard homestead tax exemption is $2,000 in county and school taxes, excluding taxes levied by town governments or taxes that go to pay interest on and retire bond debt. The $2,000 is deducted from 40 % of the homestead’s total value. Homeowners who are 65 or older are allowed a $4,000 exemption as long as the total income for both spouses was less than $10,000 in the prior year – not including income from pensions, disability income or other retirement sources.
With regard to foreclosures, the homestead exemption allows a homeowner facing foreclosure to keep up to $10,000 of the value of their home as a means of staying on their feet while they work out their financial woes. There are certain restrictions on the homestead exemption of course. First, although the home can be a condominium, co-op or single-family home, the home must be the person’s primary residence. Next, the exemption does not apply to land. Also, the person declaring the homestead exemption must be living in the home. The homestead exemption is not available for property other than the primary residence. So, for example, it would not apply to a vacation home.
Homestead exemptions can be very important to those individuals facing foreclosure or who are experiencing financial difficulties.
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