Law clarifies protections for Mass. home owners

By Jenifer B. McKim, Globe Staff

Protecting your home against creditors will be easier now that Governor Deval Patrick has signed into law a bill that automatically provides Massachusetts home owners with a $125,000 cushion against debt collectors.

The legislation, which Patrick signed yesterday, clarifies ambiguities in a 159-year-old law that provided a $500,000 protection from creditors for home owners who file a so-called homestead declaration in a county registry of deeds, a process which can cost between $35 and $100.

"It is an important piece of consumer protection,'' said Michael Goldberg, co-chair of the legislation committee for the Real Estate Bar Association for Massachusetts. "It ensures that home owners in the Commonwealth have the protection of a well-drafted, understandable homestead law.''

The legislation culminates a years-long effort by attorneys' groups to improve the homestead law, which includes flawed language and was enacted at a time when women couldn't own real property. It also addresses complaints that the law was unfair to home owners who didn't have the training or legal counsel to help protect themselves against creditors.

"At a time like today, when more and more people are facing bankruptcy, this will provide needed protection,'' said Kathleen Joyce, director of government relations at the Boston Bar Association. "It clears up ambiguities for everybody."

Among other changes, the law clarifies that home equity protections remain valid if a family member transfers a house to another relative or refinances the mortgage. It provides additional protection for home owners who receive insurance proceeds from fire or other damages. And it now provides coverage to people whose homes are in a trust for estate planning and other reasons. The law does not protect residents from foreclosure.

Susan Grossberg, a Boston bankruptcy attorney, said the new legislation will protect many debt-ridden homeowners at risk of losing their homes to creditors, like credit card companies.

"Someone who has a significant amount of equity and they are swamped with debt and they don't obtain good legal counsel, they can lose their house,'' she said. "I've seen it happen in more than one occasion.''