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Arizona Homestead: A Home Safe from Creditors

Arizona Homestead: A Home Safe from Creditors
Pat Dickson - Wed Jul 18, 2012 @ 07:00PM
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In this day and age, a lot of us have creditors at the doors of our homes, and we just don't have the money to pay them. Maybe we have good excuses, and maybe we don't. Will you lose your home?

Maybe we just want to know we are secure in case unfavorable circumstances ever put us in debt. Are you, your family, and your house safe?
 
The good news is that if you live in Arizona and own only one home, you might be very safe.
 
If your home, or its equity, is worth $150,000 or less, it is paid off or you are current with your mortgage, and there are no liens or secured interests against it, there isn't much to worry about. The Arizona Homestead Exemption protects you. 
 

The Arizona Homestead Exemption protects you if you've never filed a Homestead Declaration and Claim with the County Recorder!

However, filing a Homestead Declaration and Claim is smart if you own more than one house. You want to make sure you put all your creditors on notice which house you want protected by Arizona Law. Don't leave that issue open for argument!

It is also good practice to file your Homestead Claim just to make sure no one has any doubts what home interest, exactly, you are protecting. Your Arizona Homestead Declaration will come up should anyone, creditor, friend, or foe, search county records with you or any of your assets in mind.
 
Arizona HomesteadOne question that is often asked is "What if I have a house worth $250,000, but I owe the bank $100,000?" The answer is you are protected as long as your payments to the bank are current. If you are good with the bank, you will be fine. The Arizona Homestead Exemption protects the $150,000 in equity on your house.
 
Another question is "What if I file for bankruptcy in Arizona Federal Court? Am I safe as long as my equity interest in my home is worth $150,000 or less?" Again, the answer is yes. You are safe. Federal Bankruptcy Law respects the states' Homestead Declarations. Each state is different. Homestead protection in Arizona, we know, is $150,000. However, if you are in a state without any homestead protection, then Federal Bankruptcy Law applies. I believe it only protected $21,165 in home value in 2011.
 
Nevertheless, all I've said comes with a big set of caveats! Lawyers and the law, I know... There are exceptions to your Arizona Homestead Protection. As we have seen, if your house is collateral for a loan you took out to buy the house, you aren't safe from the bank. 
 

Caveat, even with Arizona Homestead Protection, you aren't safe from: 

* Materialman's Liens: If someone does work on your house and you don't pay them, they can put a lien on your house and you aren't protected by Arizona Homestead Law.
* Taxes: Yes, the IRS can get your house, even if it is homesteaded.
* Spousal maintenance, child support and divorce. If you owe alimony, are in arrears on child support, or going through a divorce, your house might not be safe.
* HOA fees. Even if you hate the work the gardener has been doing, be sure to pay your HOA fees. Your house, in some situations, even if homesteaded, can be sold out from under you if you don't pay your association fees.
 
Specifically, Arizona Law States:
 
"Arizona Revised Statutes 
33-1101. Homestead exemptions; persons entitled to hold homesteads
 
A. Any person the age of eighteen or over, married or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding one hundred fifty thousand dollars in value, any one of the following:
 
1. The person's interest in real property in one compact body upon which exists a dwelling house in which the person resides.
 
2. The person's interest in one condominium or cooperative in which the person resides.
 
3. A mobile home in which the person resides.
 
4. A mobile home in which the person resides plus the land upon which that mobile home is located.
 
B. Only one homestead exemption may be held by a married couple or a single person under this section. The value as specified in this section refers to the equity of a single person or married couple. If a married couple lived together in a dwelling house, a condominium or cooperative, a mobile home or a mobile home plus land on which the mobile home is located and are then divorced, the total exemption allowed for that residence to either or both persons shall not exceed one hundred fifty thousand dollars in value.
 
C. The homestead exemption, not exceeding the value provided for in subsection A, automatically attaches to the person's interest in identifiable cash proceeds from the voluntary or involuntary sale of the property. The homestead exemption in identifiable cash proceeds 
continues for eighteen months after the date of the sale of the property or until the person establishes a new homestead with the proceeds, whichever period is shorter. Only one homestead exemption at a time may be held by a person under this section."
 
Finally, where do you go to file your Arizona Homestead Declaration and Claim? Look up your county recorder online or call them up. Tell them you want to Homestead your Arizona house. They will tell you where to find the form and what the filing fees will be.
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