On December 17, 2010, Govenor Deval patrick signed into law a bill that will allow Massachusetts homeowners to better protect their family home from debt collectors. This legislation will take effect on March 16, 2011, and will essentially modernize an antiquated verison of the Massachusetts Homestead Act.
The Massachusetts Homestead Act is extremely important because it protects homeowners from losing their homes if creditors attempt to attach liens aganist their properties as well as prohibits debt collectors from compelling the sale of a home in order to pay debt collectors from compelling the sale of a home in order to pay debt. This new legislation will expand coverage for homeowners as well as clear up some uncertainty that was created by the law which was first enacted in 1851. Previously, the statue provided $500,000 in protection from creditors, but only for those homeowners who filed a written declaration with the Registry of Deeds, which can cost between $35 and $100. Under the new act, all Massachusetts homeowners will receive an automatic homestead exemption of $125,000 on the principal residence if they hold that much equity in their properties. This will help reconcile complaints that the previous law was unfair to homeowners who did not possess the training or legal advice to assist with the declaration filing process. For those homeowners who still seek $500,000 in protection, they will still be able to receive this declared homestead exemption by filing a written declaration of homestead at the Registry of Deeds.
Here's a list of other significat changes the Massachusetts Homestead Act will provide:
For married couples or for any other co-owners, both owners must execute the declaration to received the $500,000 declared homestead exemption. Previously only one owner was allowed to file declaration.
If you owned a homestead while single and you later get married, the homestead will automatically protect your new spouse.
Homesteads will now pass on to the surviving spouse and children who live in the family home should death or divorce of a person holding the homestead occur.
Homesteads are now available on 2 to 4 family homes, manufactured homes, and homes held in trust.
If a home is owned by two elderly or disable persons, the total exemption in the home can amount to $1,000,000.
No longer necessary to re-file a homestead after a refinance. Previously lenders required homeowners to either subordinate or release homesteads. Under the new law, homesteads automatically subordinate estates or homestead to mortgages and lenders are prohibited from requiring borrowers waive or release a homestead.
If Massachusetts homeowners previously declare an estate of homestead at the Registry of Deeds, there is no need to re-file, as you will still receive the benefit of $500,000 in protection.
Home equity also remain intact if a family member transfers a house to another relative.
Most importantly, the new and improved Massachusetts Homestead Act will protect the growing number of Massachusetts homeowners who find themselves in debt and who would otherwise be at risk of losing their homes to creditors who are seeking to collect those debts.
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