WHAT about the homestead exemption? Let’s use the exact words of the law as to what is considered a homestead in California.
Section 704.710 (c) of the California Code of Civil Procedure states that “‘Homestead’ means the principal dwelling 1) in which the judgment debtor or the judgment debtor’ spouse resided on the date the judgment creditor’s lien attached to the dwelling, and 2) in which the judgment debtor or the judgment debtor’s spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead. Where exempt proceeds from the sale or damage or destruction of a homestead are used toward the acquisition of a dwelling within the six-month period provided by Section 704.720, “homestead” also means the dwelling so acquired if it is the principal dwelling in which the judgment debtor or the judgment debtor’s spouse resided continuously from the date of acquisition until the date of the court determination that the dwelling is a homestead, whether or not an abstract or certified copy of a judgment was recorded to create a judgment lien before the dwelling was acquired.”
From a plain reading of this section, what constitutes a homestead can actually be quite complicated. You will notice that it also refers to Section 704.720, which talks about a six-month period. So what is this six-month period all about?
Before we go into that period of time, the law does actually talk about what a “dwelling” is to qualify as a “homestead”. For instance, if you live in a treehouse that you spent $100,000 to build, does your treehouse qualify as a homestead? Or, let’s say you live in a coach van that you spent $100,000 to remodel into your home where you live, does your coach van qualify as your homestead?
For that we look to 704.710 (a) which states “dwelling” means a place where a person resides and may include but is not limited to the following:
(1) A house together with the outbuildings and the land upon which they are situated.
(2) A mobile home together with the outbuildings and the land upon which they are situated.
(3) A boat or other waterborne vessel.
(4) A condominium, as defined in Section 783 of the Civil Code.
(5) A planned development, as defined in Section 11003 of the Business and Professions Code.
(6) A stock cooperative, as defined in Section 11003.2 of the Business and Professions Code.
(7) A community apartment project, as defined in Section 11004 of the Business and Professions Code.”
So would a tree house or a coach van you actually live in qualify as homestead? Probably yes because Section 704.410(a) states that dwelling “may include but is not limited to the following.”
But let’s say that while you were in bankruptcy, Tarzan offered to buy your treehouse for $100,000 and you got court permission to sell it to Tarzan. What happens to the $100,000 cash that you now have in your pocket, is it still exempt, in other words, is that cash of $100,000 also exempt?
That’s when the six-month period comes in, that 704.720 talks about. It says that you have to reinvest the entire $100,000 in another dwelling that qualifies as a homestead. If you don’t do this, the bankruptcy trustee can ask you to turn over the $100,000 to him or her because you did not reinvest the $100,000 in another homestead. This reinvestment can be tricky. You have to actually buy another dwelling with the $100,000, actually live in it as your homestead, within the six-month period. What happens if you don’t?
If you don’t reinvest in six months in another dwelling that qualifies as a homestead, you will lose the $100K cash that you got from Tarzan because the $100K is only exempt for six months. If it’s reinvested correctly within the six month period, and you actually move into and live in it as your homestead until the court determines that it’s actually your homestead, then your home is free. Otherwise, you are going to be in a very bad situation where you will wish that you were never born. You are going to be living a nightmare on Elm Street for a long time, probably until you die. It’s going to be a neverending horror show where you are the victim.
You are going to be literally in the lion’s den.
Here’s the most important thing you have to do: kneel down, be humble and sincerely ask God for his help to guide you to steer you clear of landing in this situation, or if you are already in it, to give you a pathway to get out of it alive. If you really are an honest debtor and blameless like Daniel before the eyes of God, do not despair – God has made a pathway to save you and grant you relief from your debts.
If you need debt relief, set an appointment to see me. I will analyze your case personally.
* * *
Disclaimer: None of the foregoing is considered legal advice for anyone. There is absolutely no attorney-client relationship established by reading this article.
* * *
Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
(Advertising Supplement)
