2009-2010 Legislative Update: Homestead and Personal Property Exemption Bills

The following summary was prepared by Diane N. Rallis of Holland & Knight LLP and Susan Grossberg of the Law Offices of Susan Grossberg, co-chairs of the Law and Public Policy Committee. The summary reflects the professional views of the authors and does not reflect the position of the Boston Bar Association or the Boston Bar Association Bankruptcy Law Section. The summary is provided for informational purposes only and should not be construed as legal advice on any subject matter.
— The Editors

There are two bills currently pending this legislative session that update both the Massachusetts Homestead and Personal Property Exemption Statutes. The current versions of the Homestead (M.G.L. c. 188 §1, et seq.) and Personal Property Exemption (M.G.L. c. 235 §34) Statutes are greatly in need of modernization and the proposed updates would provide additional financial protections to individuals in Massachusetts. If ultimately passed, these bills will have a significant impact on the consumer side of bankruptcy practice in Massachusetts. Below are links to the text of the pending bills, as well as a summary of the proposed changes to the current statutes.

Homestead Legislation (House Bill No. 1584 and Senate Bill No. 1619:
An Act Relative to the Estate of Homestead)

Significant Proposed Changes to Homestead Statute

Automatic homestead protection, without the need for recording a declaration, in an amount not to exceed $125,000, which amount corresponds to some of the limitations on homestead exemptions enacted in 2005 in the Federal Bankruptcy Code as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Individuals and families with more equity in their homes will still have a significant incentive to record a declaration to protect up to $500,000 of their equity (the amount of the declared exemption under current law).

Beneficiaries of trusts are entitled to homestead protection

Mortgages cannot terminate previously filed homesteads – instead, any provision in a mortgage that purports to terminate a homestead is deemed merely to subordinate the homestead to such mortgage

Proceeds from the sale of a home, or insurance proceeds, are entitled to homestead protection (for up to a year for sale proceeds, and two years for insurance proceeds)

Transfers among family members will not terminate a previously declared homestead – even if the homestead isn’t reserved in the deed

Manufactured homes are eligible for protection under all provisions of the statute

Massachusetts Personal Exemption Legislation (House Bill No. 1585: An Act Increasing the Value and Kind of Personal Property Exemption From Execution)

Significant Proposed Changes to Personal Exemptions Statute

Increases most of the personal property exemptions in order to partially adjust for the cost of living since the exemptions were last revised in the 1970’s. For example, the exemption amount in an automobile increases from $700 to $7,500.

Recommends new exemptions to account for items necessary to a modern household

Creates two new sections that provide for a “wildcard” exemption to cover personal property not covered by a more specific exemption and a limited exemption for jewelry

Includes an automatic triennial cost of living adjustment, which is crucial to keep the Massachusetts exemption scheme current

Brings the Massachusetts personal exemption statute more in line with other states

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