The Massachusetts Declaration of Homestead is the best protection any resident can have for their Home. Yet, only 43% of Massachusetts homeowners have a properly executed and recorded homestead protecting their home. For only $35.00 [Suffolk County/Boston Registry of Deeds recording fee], you can record a Declaration of Homestead and protect up to $500,000 in Equity in your home. That’s right, a rather inexpensive form can protect half-a-million dollars in your home value from creditors.
During the COVID-19 Pandemic, closings are occurring virtually and the Registry of Deeds for most Massachusetts counties are closed. The Boston and greater Boston real estate market is on fire, and most properties are selling at above-asking without financing contingencies. However, where the electronic closing and recording have taken over, Homesteads are being lost and not recorded. As a result, the biggest decision for most people in their life – buying a home – is not being protected like it should. Having a properly executed and recorded homestead is now more important than ever during the COVID-19 Pandemic. Homestead declaration’s can be recorded after the closing at any time – so you do not need to record a homestead at the closing. However, any time where your home is not protected with a homestead means it is at risk for collection, seizure/levy, or a lien by a creditor. So, when ever a client asks me “When should I file my homestead?” my answer is always the same: “As soon as possible.”
I. Non-Debtor Spouse Protection up to $500,000.
There is no alternative to a Declaration of Homestead in Massachusetts. Using a lawyer to properly execute and record a homestead, or perhaps two for a married couple, is a unique protection afforded under Mass. law that every homeowner should take full advantage of to protect their biggest asset in most cases. A married couple should meet with a lawyer at our Firm to discuss whether one joint married homestead or two separate homestead fits their goals, their particular financial situation, and have a custom approach to overall asset protection.
The Massachusetts Homestead Law [M.G.L. c. 188 “Homesteads”, and M.G.L. c. 235, section 34 homestead exemption] allows homeowner’s to exempt $500,00 of value/equity in their home from creditors, credit card companies suing you for an older debt, or creditors chasing after personal guarantees on business debts. More importantly, it protects the home where one spouse owes the debt, but the non-debtor spouse does not. This means one spouse can protect the home up to $500,000 from creditors from the other spouse where only that one spouse is a debtor/owes the money. The non-debtor spouse protection is one of the most powerful protections and is a fantastic tool to protect your home from your spouse’s creditors.
II. Protecting Home Equity and Selling Your Home Through Bankruptcy.
Debtor should have a recorded homestead before filing for bankruptcy protection under any chapter (Chapters 7, 11, 12, or 13). There is no downside to having this protection on your home during a bankruptcy case under any chapter. From the beginning of a bankruptcy case, up to $500,000 equity/home value will be exempt from the bankruptcy estate. Exempt means you keep you, you own it, it remains usually unaffected, and the Trustee or your creditors cannot touch it.
If you are interested in selling your home through the structured and streamlined bankruptcy process, the Homestead is just as important as in a case where you keep and protect your home. If you sell your home in the bankruptcy process, the homestead exempts your equity/home value from the sale process in bankruptcy. That means, once the house sells through the Bankruptcy process, you receive from the home sale proceeds your protected homestead amount up to $500,000. Again, there is no alternative to this protection and to ensure you reap the benefits of selling your valuable home. [In Re Cunningham , 354 BR 547 (2006) Where land subject to the bankruptcy debtor’s homestead exemption was sold, the exemption protected the sale proceeds from any obligations acquired before the debtor filed the bankruptcy petition].
Please meet with an attorney at Alex R. Hess Law Group to discuss your particular financial situation and how a homestead can provide the ultimate protection to your most important asset: Your Home.
This link takes you to the Massachusetts Declaration of Homestead Form: https://www.sec.state.ma.us/rod/rodhom/declaration_of_homestead_form_natural_persons.pdf