Many of our clients in Massachusetts have lost their homes. Many others have no equity in their homes. Some of our clients, however, have significant equity in their homes. Nevertheless, there debt is daunting and they consider filing for personal bankruptcy.
One of the bankruptcy exemptions in the law is the family home. There are two laws we follow to exempt clients homes from creditors in bankruptcy.
First, there is the federal bankruptcy law: 11 United States Code, Section 522(d)(1). That law currently exempts $20,200 in equity in the home. The Massachusetts Trustees will look for proof of the value of your home and the outstanding mortgage(s).
If the equity is less than $22,000, we can use the federal exemptions: you can keep your home and we can use the more generous federal exemptions so you can usually keep your other assets.
Second, there are the Massachusetts bankruptcy laws. Massachusetts General Laws, Chapter 188, Section 1. This exemption is $500,000. There are several caveats, of course! You have to have lived in your home for more than 1,215 days (3 years and four months) or the exemption goes down to $125,000.
There is an exception to this part of the law: if you sold a home in Massachusetts and purchased a home with the proceeds, you can go back to the $500,000 exemption. You have to LIVE in the home; it can’t be a rental property or vacation home. You cannot be found to have committed any fraudulent transfer of property in order to secure your home, or be guilty of a fraud related crime.
Finally, and most easily, you need to file a homestead with the registry of deeds.