Homesteading allows homeowners to partially protect their homes from creditors holding unsecured liens against the property. Most states allow homeowners to file homesteading forms that protect their homes by making it so creditors have to pay the owners a certain amount, such as $75,000, if the creditor sells the house. This means if a creditor is going to get $75,000 or less from the sale, they won’t bother cause it is not worth their time and money.
Liens against property are either secured or unsecured. Secured liens are liens that use the property as security against a debt. These primarily include mortgage and mechanic’s liens. Unsecured liens are general liens that creditors have made against any property you own. Depending on the size of the lien, they only come into effect when you sell a piece of property. Otherwise liens sit as encumbrances on your property. Usually the lien holder has to renew the lien every so often for it to stay in effect.
When you homestead, you make it so that anyone with a general lien on your property, where the lien amount is less than the amount secured by homesteading, cannot pursue the claim without losing money in the process. This will discourage creditors from putting a lien on your property. For more information, read the article on homesteading in Mother Earth News.
To homestead your house you must file a notarized form with your county and pay a filing fee. For specific information, contact your county information service, either by phone or online.