Fortunately for Utah homeowners, there are homestead protection laws in place to protect them from losing their homes if a bankruptcy occurs.
Under Utah homestead exemption laws, property owners can set aside a "homestead” (specific piece of real property) that would be off limits to some creditors. In the Beehive State, the exemption applies to a primary personal residence and mobile homes on up to one acre of land.
What Is a Utah Homestead Exemption?
A Utah homestead is an individual or family’s primary residence – a house or a mobile home and the land surrounding it on up to an acre.
A Utah homestead exemption protects a property against liens filed against it during bankruptcy and helps reduce property taxes. Equity that a property owner has in homestead property is exempt from creditors, which means a homeowner gets to keep their property through a bankruptcy if they continue to make the mortgage payments.
In Chapter 7 bankruptcy cases, other types of real estate, like rental properties or a homestead farm, may be nonexempt if they have value over and above the mortgage. This means they can be used to pay creditors in a bankruptcy case.
Filing a Homestead Exemption Application
A Utah homeowner will file a homestead exemption application with the county recorder in the location of their property. Homeowners should first consult with a bankruptcy attorney to make sure their properties are exempt.
Utah Homestead Exemption Amount
Under Utah law, property owners can exempt up to $42,000 of their primary personal residence covered by the Utah homestead exemption. They can use the exemption to protect one or more parcels of land, but can protect only up to one acre in total.
Homeowners can exempt a maximum of $5,000 in real estate that is not their primary personal residence. Those filing joint bankruptcy with a spouse can protect up to $84,000 in their home for a primary personal residence and $10,000 for a secondary residence.
A Utah homestead exemption applies to residences and mobile homes. Homeowners may also protect their water rights if used for irrigation or domestic purposes. A Utah homestead exemption also applies to proceeds from a property’s sale for up to a year after it is sold.
Federal Exemptions Not Available in Utah
While some states allow property owners filing bankruptcy to use federal bankruptcy exemptions instead of state exemptions, Utah does not. Residents of the Beehive State must use state exemptions.
How to Declare a Property as Utah Homestead Land
According to Utah Code Ann. Section 78B-5-504, residents must first file a homestead declaration before receiving a homestead exemption. Property owners can claim homestead exemption by filing a signed and acknowledged declaration with their county recorder. It must contain:
- Statement that the property owner is entitled to a homestead exemption and if married, their spouse has not filed a homestead declaration.
- Description of homestead property.
- Estimated cash value of the homestead property.
- Statement with the homestead exemption amount and the names, ages and address of spouse and dependents to determine the homestead’s value.
If the property owner does not file or serve this declaration, the home’s title will pass to the buyer upon execution, free of all homestead rights.
If the property owner is married, no conveyance of the property, security interest in it, or contract to create or convey a security interest in it, is valid, unless both spouses agree upon execution of the security interest, conveyance or contract.
Sale at Auction Must Be Above the Exemption Amount
A property with a homestead exemption may not be sold at auction if there are no bids exceeding the homestead exemption’s declared amount. If the property is sold, the sale is subject to redemption by the judgment debtor.
Primary Personal Residence in Utah
In Utah, a property must serve as the homeowner’s primary residence for a minimum of 183 days per calendar year. A county assessor will look at certain factors to determine whether or not a property is a primary personal residence:
- Length of continuous residency in the place claimed as primary personal residence (if it is owner-occupied) or a yearly lease to a tenant.
- Residence of the claimant's spouse.
- Location of the claimant’s vehicle registration.
- Payment and nature of property taxes in another state or county.
Homeowners will need to show the recorder copies of their:
- Driver's license.
- Voter registration.
- Utility bills.
- Tax return.
- Vehicle registration.
No Exemptions Available for Some Types of Property
There are no exemptions for:
- Commercial properties.
- Vacant land.
- Vacation homes and time shares.
- Second homes.
Do Utah’s Homestead Exemptions Protect Homeowners from All Creditors?
Utah’s homestead exemption laws may not protect homeowners from all creditors. For example, they may still be forced to sell real estate if:
- Property had preexisting lien before the homestead’s establishment.
- Homestead property was pledged as a mortgage credit.
- Homeowner owes the state of Utah, its counties or municipalities past due taxes.
- Homeowner owes money to mechanics, contractors or builders for repairing or improving the property.
Additionally, federal income tax liens may override Utah’s homestead exemptions, according to the state’s Constitution’s Supremacy Clause, when there is an overlap or a conflict of law.
The Internal Revenue Service does not typically foreclose on a home to collect a tax debt. It usually gets involved only if a homestead property is mortgaged or sold before the expiration of a federal tax lien.
- You must visit the county recorder in the county where your residence is located to fill out an application.
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.