Diana, a California homeowner, files a declared homestead on her primary residence. The home has a fair market value of $900,000, a mortgage balance of $500,000, and the current California homestead exemption is $300,000. A judgment creditor obtains a court order for forced sale. What is the MOST likely outcome?
Correct Answer
A) The sale proceeds, and Diana receives the first $300,000 of equity after the mortgage is paid
Under California CCP §704.800, in a forced sale of homesteaded property, the mortgage is paid first from the sale proceeds. Diana's equity is $400,000 ($900,000 - $500,000). The homestead exemption of $300,000 is then protected and paid to Diana. The remaining equity of $100,000 would be available to satisfy the judgment creditor. Diana receives her $300,000 exemption from the equity after the mortgage is satisfied.
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