Can I Lose My Home if I am Sued?

By August 19, 2014Uncategorized

The likelihood of losing your home is small but it can occur in a case involving significant judgments.  If you carry insurance that protects you against the lawsuit, the insurance will cover the loss up to the policy limits.  This commonly occurs with automobile insurance. For example, if you are at fault in an automobile accident, your automobile insurance will cover your liability up to your policy limits.   However, you can be liable for damages in excess of the policy amount. Therefore, if you are involved in an accident where the other driver has serious injuries, you should work closely with your insurance company to ensure the insurance company settles the case within the policy limits.  Remember that the insurance company’s lawyers represent the insurance company, not you.  In a high-dollar figure case, it is a good idea to hire your own counsel to ensure your interests are protected.   If you go to trial, lose and the other driver obtains a judgment in excess of the insurance limits, you will be liable for the excess amount.  For example, if the other driver has damages of $2 million and your auto insurance policy has a $1 million limit, you would be liable for the remaining $1 million.  The other driver will then look to your assets to satisfy the judgment. One area he or she may look to is the value of your home.

In Nevada, there is a homestead exemption that protects the equity in your home up to $550,000.  The homestead exemption does not apply to liens for payment of taxes, IRS liens, mechanic’s liens, child support or alimony payments.  However, it does prevents a general lawsuit creditor from putting a lien on your house unless the equity in your home exceeds $550,000.   In order to use the homestead exemption, you must record the homestead in the real property records.  You can access the form here.   Most people in Nevada do not have equity in their homes that exceeds $550,000.  Therefore, the likelihood of losing your home in Nevada from a lawsuit is fairly low.  In our above example, even if the judgment creditor has a $1 million judgment against you, you would have to have equity in excess of $550,000 for the driver to put a lien on your house.    If you live in another state, though, you should check your state’s homestead laws.   If your state does not have a homestead exemption, then there is a greater chance that a judgment creditor could place a lien on your home and force the sale of your house to satisfy the judgment.

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