Homestead Protection From Forced Sale Gets Boost For Some Bay State Homeowners; Will Ease Pressure From Bill Collector Threats Against Home Equity

The Boston Globe reports:

• Credit card debt got you down? Revisions to the state’s Homestead Act that take effect Wednesday offer greater protection to [Massachusetts homeowners] from losing their homes to debt collectors.

• Though the law won’t protect someone who doesn’t pay a mortgage from losing a home to foreclosure, it could protect a homeowner from being evicted because of claims from an automobile accident or credit card debt, said Secretary of State William F. Galvin.

• “It’s an important protection for homeowners,’’ Galvin said. “Especially in an age where people have been really bedeviled by debt. This is not going to solve the mortgage problem. But it does solve the problem where people put their home at risk.’’

• In the past, people were protected up to $500,000 if they filed a so-called homestead declaration on their primary residence. They will still have that protection after filing, but now, even if they have not filed a homestead declaration, homeowners will have automatic protection up to $125,000.

• And couples who are over 62 or disabled will get double the protection — up to $1 million if both partners file a homestead declaration. “It starts with the concept that the home is something we want people to protect,’’ Galvin said. “The objective here is to protect the home so that people aren’t out on the street.’’

• Homeowners who already have filed homestead declarations do not need to refile to be protected by the new law. And people who seek a homestead declaration will now be covered even for preexisting debt. Attorney groups had pushed for years for revisions to the state’s antiquated homestead law, which was originally enacted when women had limited rights to property.

• The new law makes clear that children and both spouses are protected, even if the person who signed the homestead declaration dies. Under the revisions, both spouses who own the home must sign the homestead declaration, and if only one is considered the owner, he or she must declare marital status and whether a spouse is living there. If a single homeowner gets married after seeking the homestead declaration, the protection is automatically extended to the spouse. The new law covers manufactured homes and properties that are held in trust.

• The law generally protects a home from claims against the homeowner. But not all claims. A divorced father who fails to pay child support and lives in a million-dollar home would not be covered, for example. Nor would someone who uses his home as collateral for another loan.

• But, the law could lessen the chance a homeowner would be required to sell his home during a bankruptcy liquidation. And, the spouse of a compulsive gambler who runs up credit card debt would no longer be at risk of losing the family home, he said.

• Anyone can file a homestead declaration on a primary residence for a cost of $35 at the county Registry of Deeds. More information is available there and on the [Massachusetts] secretary of state’s website, sec.state.ma.us/. (1)

Source: Beginning this week, Homestead Act strengthens protection.

See also, Secretary Galvin Announces Changes to the Homestead Protection Law:

• "Homestead protections now extend to pre-existing debts and the proceeds of a sale or insurance coverage.(2) [...] If you are purchasing your new principal residence, your closing attorney must provide you, as a mortgagor, with notice of your right to declare a homestead protection. At that time, you will be asked to acknowledge receipt of this notice in writing."

(1) Given the proliferation of sleazy "zombie debt" buyers acquiring old, stale, delinquent credit card accounts for pennies on the dollar with the view of forcing collection through forced sales of real estate, wage garnishment, etc., there seems to be no reason for Massachusetts homeowners not to cough up the $35 and file the homestead declaration to get the benefit of the entire $500,000 of home equity protection from these bill collectors (who typically count on consumers being unaware of their legal rights in order to squeeze them out of cash that needn't be paid out).

Unlike some states (ie. Florida and Texas, to name two), Massachusetts requires the formal filing of a declaration to reap the full protections of the state's homestead law against forced sale. This recent change in Massachusetts law will at least now extend partial protection, to the extent of $125,000 of home equity, to those homeowners who have failed, unwittingly or otherwise, to file the formal declaration with the appropriate county office.

For the homestead declaration forms and additional information, see:

• Declaration of Homestead for Homes Owned by Natural Persons,
• Declaration of Homestead for Homes Owned by Trustee(s),
• Questions and Answers, The Homestead Act (Massachusetts General Laws, Ch. 188, §1-10, William Francis Galvin, Secretary of the Commonwealth; updated 3/11/11) ("The declaration of homestead shall benefit each owner named on the homestead and each of the owner’s family members who occupy or intend to occupy the home as their primary residence. Each family member shall have the right to use, occupy and enjoy the home. The new law provides additional protections to spouses that are not listed as owners in their principal residences. For example, protection extends automatically to a new spouse where an unmarried person declared a homestead and later marries. Also, divorcing spouses are protected against the loss of homestead through termination or divorce. Neither divorce nor remarriage will affect the homestead of the spouse who still primarily resides in the home. [...] Additionally, if there are dependent minor children, under the age of 21, living with all elderly or disabled homeowners, you may wish to consult an attorney in order to adequately protect the children’s right to use, occupy and enjoy the home. Be sure to use the proper homestead form when you file.")

(2) See Questions and Answers, The Homestead Act (at page 4):

• What if my home is sold or damaged? If the home is sold, the sale proceeds shall be protected by the homestead for one (1) year after the date of the sale or on the date when a new home is purchased with the proceeds, which ever is earlier. If the home is damaged by a fire, for example, the insurance proceeds are protected for two (2) years after the date of the fire or on the date when the home is reconstructed or a new home is purchased, which ever is earlier.