Buying a home isn’t just the American dream. It is a source of financial stability and intergenerational wealth. People have housing that they can rely on and equity that they can leverage during times of financial stress. They often dream of leaving their homes to their children or grandchildren.
Unfortunately, the owner may not be the only party hoping to leverage the equity accumulated in a home. Sometimes, creditors attempt to take legal action against an individual and may seek repayment based on their home equity.
Homes are vulnerable to collection efforts
A creditor pursuing a lawsuit might ask for a lien against the property. They can then foreclose on the lien as a way of demanding repayment. That process may force the property owner to refinance or sell the home to cover their debts. Other times, they may simply record the lien as a way of forcing the property owner to repay them when they eventually refinance, sell or transfer ownership to another party. Creditors can essentially convert unsecured debts to secured debts by seeking a lien against real property. Thankfully, homestead exemption rules in Nevada help people protect some of the equity they have accrued.
What is a homestead exemption?
If people could not protect their interests in their own homes, they may be at risk of indigence after a medical emergency or job loss. State law therefore allows people to protect a certain amount of accumulated equity in their primary residences. To legally protect what they have invested in a home, they have to file paperwork with the state establishing their residents as their homestead. After doing so, a portion of their equity has protection from creditor lawsuits and other debt collection efforts.
Currently, Nevada property owners can protect up to $605,000 worth of home equity in their primary residences. In scenarios where homeowners have accumulated more equity than that, some of their interest in their homes may be vulnerable to collection activity. Pursuing a homestead exemption is one of several ways to protect personal resources from aggressive debt collection efforts.
Those who have overwhelming financial obligations may need help evaluating their different options for protecting themselves from creditors and regaining control over their finances. Homestead exemptions and similar legal protections can limit what people may otherwise lose to aggressive collection activity.
