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Massachusetts Homesteads Protect Assets

The Massachusetts Homestead law is an exceptional way for homeowners to protect their primary residence from creditors; we recommend everyone file one.  In bankruptcy, it is a useful tool because it “exempts” equity in the home from the creditors.  The federal bankruptcy laws were amended in 2005 and must be carefully followed in bankruptcy court.  The Massachusetts Homestead Law underwent significant amendments in 2011.  It needs to be carefully followed to get the maximum $500,000 protection; and $1 million for seniors.  This can be particularly important if you end up in a nursing home.  The new law can also apply to folks whose home is owned by a real estate trust.  Furthermore, there are protections for unmarried co-owners under the new Homestead Law.

How is it working?

Bankruptcy Lawyer for Debtors Wins Homestead Stacking Case

In an interesting case handed down late last year, In Re:  Gentile, Charles E., United States Bankruptcy Court, Central District, Massachusetts  the Court developed a further protection for Massachusetts consumers.  In this case, the husband and wife debtors filed for Chapter 7 personal bankruptcy protection in October 2011, claiming that the $195,667 in home equity was exempt under the $500,000 Massachusetts Homestead exemption.  In the previous months they had undertaken the following property transactions:  The husband deeded their home to his wife and then the wife deeded the home to the husband AND the wife.

The federal homestead law says that there is a protection of only $146,450 if the debtor files his or her homestead within 1,215 days of filing for the personal bankruptcy; you can’t use the Massachusetts protection.  The creditors argued that because of the various transfers, there was no Massachusetts protection; and, only one spouse had protection, or, rather, the protection was only $146,450.  The Court, in a decision by Judge Hoffman, found that while the pre-petition transfers between the Gentiles caused their Massachusetts homestead exemption to” revert to the less generous federal exemption, the $146,450 “cap may be ‘stacked’” adding $146,450 for each spouse, providing coverage for the whole exemption.

While this is less than the $500,000 Massachusetts exemption they sought, it offered far more than the $195,667 that they needed!

What Can Massachusetts Homeowners Do to Protect Their Homes

 It’s simple:  file a homestead.  You can do it on your own.  You can retain counsel to do it for you.  It’s cheap.  The filing fee in the Registry Of Deeds is $35.  Can it really be that simple?  Generally, yes, however, we recommend that you retain counsel because the law can become complicated.  As you can see by the Gentiles’ case, undertaking property transfers, for estate planning purposes, or for bankruptcy planning purposes, can expose possible holes for creditors to attack.  Not every case is the same and not every bankruptcy lawyer is clever enough to win against the banks and creditors who appear in bankruptcy court every day.

If you need a Homestead to protect your assets, or if you own a home and are contemplating personal bankruptcy, call an experienced attorney.  Neil Burns has been representing homeowners since 1985.  So call 617-227-7423 for a free consultation.

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