The new law provides you an automatic homestead protection of $125,000, no action on your part is required to obtain this protection. However it is to your advantage to file a declaration of homestead if you have not done so previously as this increases your protection to $500,000. All owners can sign the declaration of homestead, so that equity in the home will not be vulnerable to creditors of any owners.
If you have previously filed a declaration of homestead you are not required to file a new one to receive the benefits of the new law. However, if you have refinanced your home in recent years or if there is a risk of a lien being placed on your home it may be advantageous to you to re-record your declaration of homestead.
You are now protected against debts you accrued prior to filing the declaration of homestead. This is good news for homeowners who previously might have needed to file for bankruptcy in order to protect their home. You can now can protect your home up to $500,000 without filing for bankruptcy. However, if you will be filing for bankruptcy it is important to file a declaration of homestead if you haven't filed one previously.
If you sell your home, the proceeds of the sale are now protected from creditors for one year. Likewise if you lose your home due to some casualty, the insurance proceeds are protected for two years so you can purchase a new home or repair the damaged one.
Protection is available up to an aggregate of $500,000, per residence, per family. If you are age 62 or older, or if you are disabled according to the Social Security Administration, the new law affords you special protections. If both members of a couple file for either an elderly or a disabled homestead, their equity protection may be increased up to one milion dollars ($1,000,000).
A homestead declaration does not provide protection against all creditors. For example, it does not from claims relating to taxes, your mortgage, an equity line of credit, child support or alimony, or a lien placed on your home prior to your filing.