Massachusetts has changed the homestead law effective in March 2011. These changes will benefit every person in Massachusetts that owns a home. A homestead is a statutory exemption protecting a principal residence against the rights of creditors. This means that a homeowner who owes money for a debt has some protection against losing his home to the creditor. The new homestead law provides an automatic homestead in the amount of $125,000.00 and three other types of optional homesteads that provide protection of $500,000.00. I recommend that every homeowner should take advantage of the homestead law and file a declaration of homestead to take advantage of the full $500,000.00 protection.
A homestead does not prevent a creditor from attaching a home. As an example of the way this law works, take the example of Homeowner A who causes an auto accident and gets sued for $1,000.000.00. The damages sought exceed the amount of A’s auto insurance so the victim of the accident obtains an attachment of A’s home. If there was no homestead, the victim could force a sale of A’s home to get the equity in the house. However, with the homestead, the victim could still force a sale of the house but the first $500,000.00 in equity ($125,000.00 if it’s the automatic homestead only) goes to A and not the victim. This means that the victim won’t force a sale of the house unless A has more than $500,000.00 in equity.
There are many improvements in the new law that will benefit homeowners. The new law extends the homestead protection to spouses and other family members. The law also protects against prior debts that are not yet secured by the house. Of course, it doesn’t protect against voluntary liens on the real estate such as mortgages.
I recommend that every person in Massachusetts who lives in a house that they own declare a homestead.
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