Legal Question in Bankruptcy in Massachusetts

Re: bankruptcy and homestead

When you file a personal bankruptcy, you have a choice of taking either the federal exemptions or the state exemptions. Case law has determined that a debtor who elects to take the state exemptions is entitled to a $500,000.00 exemption in equity in a primary residence. In other words, if you home is worth $350,000.00 and is encumbered by a mortgage on which you owe $100,000.00 and you filed for bankruptcy, you would be able to protect the $250,000.00 in equity by i) having recorded a declaration of homestead prior to the filing and ii) taking the state homestead exemption.

With respect to attorney's fees, if you owed an attorney monies for unpaid upon filing for bankruptcy, in most cases, these fees would be treated as a general unsecured creditor entitled to the same treatment as a credit card.

Re: bankruptcy and homestead

The homestead works differently in bankruptcy because the bankruptcy law controls. In a case called In re Weinstein, the First Circuit Court of Appeals held that while Massachusetts law establishes the exemption, the bankruptcy code determines what debts it applies to. As a result, the homestead is MORE valuable in bankruptcy than outside of bankruptcy. If you file a chapter 13 case, the attorney's fee can be paid as a "administrative" claim; this is very common. Hope this helps. David Baker

Re: bankruptcy and homestead

When you are filing for a bankruptcy, you have to choose federal or state exemptions scheme. If you have considerable equity on your property, then you will go with a state exemption because the homestead exemption protects the equity in your house up to $500,000.00 under Massachusetts General Laws Chapter 188. However, the new Bankruptcy Act has all kinds of limitations on the amount of homestead that you can actually claim based on the number of days that you have owned your property; fraudulent transfers within ten years; felony convictions.

Homestead is reduced to $125,000.00 if you have owned your property for less than 1215 days, roughly 3 years and four months. Exceptions apply to family farmers and for interests transferred from a previous ownership.

Homestead is not available in case of fraudulent transfers

Felony convictions, homestead is reduced to $125,000.00 regardless of the length of time that you have owned your property.

Federal exemption under the Bankruptcy Code , 11 U.S.C. Section 522 (d)(1) only allows a homestead exemption of $18,450.00, $36,900.00 if filing a joint petition.

Attorney�s fees can be included in a bankruptcy petition.