Homestead Definition

• A homestead exemption prevents creditors from forcing you to sell your home to repay a debt. In Texas, you can only apply a homestead exemption to your primary residence, and only individuals can qualify. Corporations and partnerships can't exempt real estate from debt collection efforts. To apply for a homestead exemption, you must file a homestead declaration. If you don't file this declaration, the court will file on your behalf and charge you a fee.
  
  

Homestead Exemption Law

• Under federal bankruptcy law, you must live in your home for at least 40 months before you can claim a homestead exemption that exceeds $146,450. Some states place a limit on how much of your homestead is exempt from collection efforts, but Texas will allow you to claim an exemption on the full value of your homestead regardless of how much it is worth. However, you can't include more than 10 acres in the city or 100 acres in the country in your homestead exemption.
  
  

Exceptions

• You can't claim a homestead exemption for a debt related to your home, such as a mortgage or debt you incurred to make home improvements. You can't file a homestead exemption for debt you owe to the Internal Revenue Service, either. Homestead exemptions don't apply to rental property or business property. If you sell your homestead, the proceeds of the sale will be exempt from seizure for six months, but if you don't reinvest the funds in another home before six months have passed, creditors may seize them.
  
  

Considerations

• Though creditors can't seize the proceeds from the sale of your home if you file a homestead exemption, they can still place liens against it to prevent you from being able to sell it easily. If you have such a lien against your title, a title company may require you to pay the debt or prove that the property is your homestead before they will issue title insurance to a new owner.