New homestead law offers protection to Mass homeowners
Dec 2010 20

The Commonwealth of Massachusetts passed legislation last week that will make it easier for Massachusetts’ homeowners to gain protection from creditors should they get into financial difficulty.

The law clarifies a long-standing one that allowed homeowners to hold onto their homes even if they stopped paying their bills.*

From the website of the Commonwealth of Massachusetts.

St.2010, c.___ (S2406), effective March 16, 2011. This new law will provide radical changes to current homestead law.

* Automatically protects up to $125,000 in home equity without filing
* Protects up to $500,000 for those who file for homestead protection
* Allows spouses to both file– currently only one may file
* Clarifies that there is no need to re-file after refinancing
* Provides coverage for homes kept in trusts

Again what it’s saying is, when the law becomes effective, next spring, you will given homestead act protection of $125,000 (for free) automatically when you buy a new home. You can still file for protection of $500,000 for an a fee.

What this means is, if you owe credit card and other debt, they can’t force you to sell your home in order to pay them. Even better, if you should sell your home and make a profit, you can keep that profit (up to the limits) without having your creditors force you to pay them off.

** Check with your real estate attorney for details, exclusions, and specifics **

I don’t know whether or not the law is retroactive, meaning if you don’t already have homestead protection you should contact a real estate attorney or the state to find out if there’s anything you need to do (or pay) in order to be covered.

For more information, check out the Boston Globe and the website.

* Caveat: My understanding of both the existing and revised law is that homestead protection does NOT protect you from foreclosure – if you stop paying your lender, it will take your home away. If you stop paying your other bills, you will be protected from those creditors forcing you to sell your home in order to pay them back.

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