The new bankruptcy law signed into effect on April 20, 2005 by President Bush may affect the equity in a debtor’s home. Substantial concern has been raised with regard to the ability of a debtor to protect his or her residence. Under present Massachusetts law, debtors can elect to use the Massachusetts Homestead Exemption to protect $500,000 of equity from creditors, either in a bankruptcy or non-bankruptcy situation. Under the present law, and effective immediately from the date the law was signed by President Bush, that figure has been reduced to a maximum of $125,000 in many situations. The ability to increase the $125,000 amount will be dependent upon the length of time that the debtor has owned the home, how long he or she has lived within the state and the source of the funds used to purchase the residence. This is a major change from the former law protecting residential property from loss when faced with financial difficulties.
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