We should first note that the homestead exemption does not protect the home. Instead, it protects the homeowner’s equity in the home. This means that the exemption does not protect the homeowner from a mortgage holder. It also means that an unsecured creditor may seize and sell the home pursuant to a court order, if they can show that it has value sufficient to pay off the mortgage and cover the exemption amount.
The homestead exemption law includes various provisions for the protection of equity in personal property, and a person living aboard a boat, mobile home, or motor home may therefore qualify for the exemption if they can prove that it is their primary residence and that it is moored or stored at a permanent location. However, the procedures for the sale of personal property under the homestead exemption law are more “creditor friendly” than the procedures for real property, and a court order may not be required for the sale of a boat or other personal property.
The homestead exemption does not require the filing or recording of any paperwork, so there is no need to be concerned about whether the vessel’s documentation would be “jeopardized.” A homeowner may file a “homestead declaration” with the county to temporarily protect his or her equity after a voluntary sale of the home, but this would not involve the Coast Guard.
A homestead exemption for a boat is further complicated if a maritime lien is claimed against the vessel. We have discussed the unique nature of maritime liens in a number of prior installments of this column, so I won’t go into an exhaustive discussion here. However, some of the characteristics of maritime liens are particularly relevant to the homestead exemption.
Broadly speaking, a maritime lien will arise when a product or service is delivered to a boat or when a boat is involved in an accident. The lien is immediately perfected even if it is never recorded with the Coast Guard, and it is a secured obligation of the vessel. Since the homestead exemption protects the owner’s equity from unsecured claims only, it offers no protection from a creditor who holds a maritime lien, even if the lien is never recorded.
The homestead exemption may therefore be available to a boat owner, but it will only protect him or her from claims that are not related to the boat, and it does not prevent the boat from being seized by a creditor, regardless of the nature of the claim.
Finally, we must point out that this discussion amounts to a complicated overlap of maritime and creditor law, and a boat owner who is interested in protecting a boat from creditors should speak with an attorney — or more than one attorney — experienced in both of these areas of law.