Each state sets terms where a homeowner is protected by what is called an estate of homestead. Homestead laws allow homeowners to declare a limited portion of their property as a “homestead,” thus sparing it from creditors in the event of a bankruptcy or other financial hardship. One primary purpose of homestead laws is to prevent homelessness in the event of bankruptcy, which generally requires a person to sell all of their assets to pay for their debts.
An automatic exemption of $125,000 is granted to everyone who owns a home and principally resides in that home under Massachusetts law. Providing a written declaration of homestead at the local registry in the county in which the residence is located can increase this amount to $500,000.
Massachusetts Homestead provides limited protection of the value of a debtor/homeowner’s home up to the amount of $500,000 against only unsecured creditor claims. The Homestead Act does not, however, apply to situations where the house has been used as collateral or security for a loan in the first instance as a condition prerequisite for obtaining a loan or other financing.
The Massachusetts homestead law defines the term “home” as single family homes, 2-4 family homes, land attached to those residences, manufactured homes, home cooperatives, and a condo unit used for residential purposes. Any property owned, but not used as a primary residence, does not qualify under homestead laws. Additionally, homestead does not apply to commercial properties.
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