Break may shield homes

Think back on all those joys of buying a home.

Remember the redecorating? How about showing off the new place to your friends and family? And who could forget those vast swaths of forest sacrificed to junk mail warning you to file your homestead exemption NOW, before it's TOO LATE!?

Those fliers might have proved a nuisance, but they point to a bit of legal arcanum that could spare your home from bill collectors. And that's a move that could pay off in today's shaky economy, with its rising layoffs and wage freezes.

A homestead exemption prevents a creditor from forcing a court-ordered sale of your primary residence to satisfy a debt. It will also protect up to $550,000 in equity on the home you own and live in full time. But there's some confusion about how homestead exemptions work. First, they don't protect you from all bill collectors. Second, there's no time limit on filing, despite what those mailers said, and you don't need someone else to fill out the simple, one-page document for you. That means you can take your time filing and submit the documents to Clark County officials yourself.

Observers offered mixed testimony on whether the faltering economy has increased the number of consumers querying about homesteads.

Statistics from the Clark County Recorder's Office, which accepts and files homesteads, show a drop in requested exemptions, from 34,548 homesteads in 2006 to 16,655 filings year-to-date as of Tuesday. But that falloff could come from a big dip in home sales in the market. Susan Wohlbrandt, a public information officer for the recorder's office, declined to speculate on reasons behind the decline in homestead filings, but she noted that 2004's white-hot market brought big gains in submissions.

David Grant, an attorney with the Law Firm of Jeffrey Burr in Las Vegas, said interest in homesteads has "definitely increased" among his clients in the last year or so, as consumers look to protect assets such as real estate, savings accounts, investments and retirement funds.

One county official agreed that economic turmoil would likely raise interest in homestead exemptions.

"You could make an assumption that, because of the economic times and the crisis we're facing, that people would be filing with more frequency," said Clark County Assessor Mark Schofield, whose office provides and notarizes homestead forms for free. The Clark County recorder charges $14 to file the paperwork.

But a homestead exemption won't protect anybody from today's major economic hobgoblin -- home foreclosure.

That's because it doesn't apply to mortgages. Nor does it protect homeowners from federal tax liens or mechanics' liens for home improvements. It also can't save your equity if creditors are chasing you for child support, alimony or money you owe to the U.S. Department of Health and Human Services for Medicaid expenses.

For other medical bills, credit-card debts, business and personal loans or accident liabilities, a homestead could keep you in your home, said Courtney Lee, a consumer attorney with the Legal Aid Center of Southern Nevada.

And, if you own your home free and clear, with no mortgage attached to the property, you can apply to the Nevada treasurer for allodial title, which would lift that $550,000 cap and preserve all your equity.

Nevada's homestead law rests "at the higher end of protection" compared with other states' laws, Grant said. A handful of states, such as Texas and Florida, offer no limit to the equity a homestead conserves. Other jurisdictions, such as West Virginia and Ohio, limit exemptions to $20,000 or $25,000.

Following big jumps in Silver State home values between 2004 and 2007, legislators raised Nevada's homestead exemption from $200,000 to $350,000 in 2005, and from $350,000 to $550,000 in 2007.

Grant doesn't sense an appetite for additional increases when the Legislature convenes in February, given the ground home values have yielded here in the last year. But because Nevada ranks as a "fairly debtor-friendly" state, Grant said, another boost in the limit isn't impossible.

If you want to submit a homestead exemption, you don't need to hire a third party to handle the documents. The law does ban personnel within the recorder's and assessor's offices from helping you fill it out, though, because that would cross the line into dispensing legal advice, Schofield said. So if the paperwork confuses you, retain an attorney, he advised.

Observers also warn consumers against those mailers predicting doom if you don't hire them to file your homestead immediately. For one thing, the homestead form is a simple, one-page document that's easy to fill out and submit on your own. Lee said she sees no reason for consumers to pay additional money for the service. What's more, many such businesses don't even send the paperwork to the recorder for you. You still need to walk it down to county officials yourself.

Grant said the fliers unnecessarily scare homeowners.

"The time crunch is not as severe as those mailers would lead you to believe it is," he said. "Those mailers are pretty scare-mongering. They make people think that if they don't file now, they'll never be able to do it, and that's not the case."

The only time requirement, say experts, is that you file it before the actual court-ordered sale of the property. Even if you have a judgment against you, it's not too late to file, as long as the court hasn't yet broken up your assets.

"You might as well take advantage of (homestead), especially if it can give you some peace of mind in knowing that your home is somewhat safe," Grant said. "If you're a really cautious person, you'd probably want to have it filed, just in case you ever need it."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.