As of today, March 16, 2011, the new Massachusetts Homestead Law is in effect, which will allow Massachusetts homeowners to protect their primary residence from unsecured creditors, with some regulation. These changes come with the revision of Massachusetts General Law c. 188, sect. 1-10. The revision came about through Massachusetts Senate Bill 2406, "AN ACT RELATIVE TO THE ESTATE OF HOMESTEAD" which was signed by Governor Patrick on December 16, 2010.
The new law is extensive and aims to clear up some of the ambiguities of the prior homestead law. An estate of homestead is a form of protection for a person's primary residence; an automatic homestead protection of $125,000 is available even if a home does not declare a homestead exemption. Though this automatic protection may be sufficient to protect a deposit made on the property, it is unlikely to cover the full value of one's home. A family can protect their property at a value of up to $500,000 per residence by filing a "Declaration of Homestead." This must be completed at the Registry of Deeds for the county in which the property is located.
This declaration protects the real property (i.e. the manufactured home) of a principal residence against attachment, seizure, execution on judgment, levy or sale for the payment of debts. This means that one's home is protected from unsecured creditors in the event of a bankruptcy, which is a growing concern to homeowners in the current real estate market. There are additional bankruptcy homestead exemptions outlined in this law that will not take effect until April 7, 2011.
The state's website outlines the major changes resulting from the Massachusetts Homestead Law. The guidelines now include:
- Existing homesteads recorded prior to March 16, 2011 remain valid
- There is an automatic $125,000 homestead; no recordation of a homestead declaration is needed for this protection
- Homeowners receive a $500,000 homestead protection by recording a homestead declaration; all owners must sign to gain the protection
- All owners must occupy or intend to occupy the home as principal residence
- Owners who are elderly or disabled should each file a homestead under section 2 of the new law to gain maximum protection (beyond $500,000)
- Under new law, both spouses can record a homestead
- Property held in trust can be homesteaded
- Every homeowner who has refinanced his/her mortgage in the last several years should record a new homestead declaration since many refinancing mortgages contained a waiver of homestead rights
- If a married couple has divorced or separated, each should re-examine whether a new homestead declaration is needed
- As under prior law, homestead declarations are subject to mortgages executed by all owners.
Secretary of the Commonwealth William Galvin has produced a question and answer packet for homeowners who have concerns or wish to learn more about the recent changes. The packet outlines the revisions made through the Homestead Act and is available on the state's website. The website also includes the Declaration of Homestead form required by the Commonwealth for both property owned by individuals and property owned by a trust.
As with any serious real estate legal matter, it is always best to seek an attorney's advice and guidance. Though a declaration of homestead protects a homeowner filing bankruptcy against unsecured debt, it does not protect the home from secured creditors who wish to repay debts with the sale of the property, such as first and second mortgage or equity lenders. A declaration of homestead can help homeowners retain more of their assets in either a Chapter 7 or Chapter 13 bankruptcy by utilizing the state homestead exemptions, but it is a complicated and serious legal matter that a homeowner should not have to undergo alone. If you are facing financial hardship or are behind on mortgage payments or other loans, the experienced attorneys at P&P Law can help. Contact us today to schedule a free hour-long consultation to ensure your home and other assets are protected.
