Massachusetts Homestead AND Federal Exemptions?

27 Nov Massachusetts Homestead AND Federal Exemptions?

You can use your state exemptions to protect assets. If your state law permits, you can choose to use federal exemptions instead. Can you use both?

The Massachusetts homestead will protect $500,000 of home equity. It protects your family, not just you. For example,your ownership interest is protected if your children reside in the home even if you got divorced and moved away. In re Thompson, 2008 Bankr. LEXIS 1199(2008) (Boroff, J.) (contra In re Cassese, 286 B.R. 472 (2002) (Rosenthal, J.) (resident children not addressed)). Your ownership interest is protected by your spouse’s homestead. In re Farrenkopf, 3054 B.R. 382(2004). Your ownership interest is protected by your parents’ homestead if you live in the home jointly owned with your parents. In re Vasques, 337 B.R. 255. (Because you and your parents are one family unit, you are not allowed to file separate homesteads forthe samehomethat you all live in even if you are an adult.) Got this so far?

Let’s expand. Your homestead protection would be reduced from $500,000 to $146,000 if you moved to your current state and acquired your home within 3 1/2 years before filing bankruptcy. (It’s the law, man. You’re not allowed to move to a homestead-generous state and quickly file.) But your spouse’s ownership interest is protected to the full $500,000even if the two of you moved and filed within 1,215 days. In re Walsh,359 B.R. 389 (2007). All because the Massachusetts homestead protects your family, and not just you.

“Logic compels” (I just love that phrase) the next step, that you can use the federal protections in Massachusetts while relying on your family’s homestead to protect your home. No case goes this far (the debtor in Walsh used the state exemptions) so I cannot promise this outcome. The facts ofan earlier case, In re Robbins, 187 B.R. 400 (1995), show that the debtor did precisely thisbut the decisionwas limited to a rejection of a post-petition election of a statutory Tenancy by Entireties election.

WARNING: The Massachusetts legislature just passed a new homestead law which has not yet been signed by Governor Patrick. I’ll report on this in detail if it gets signed.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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