Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

December 27, 2005

Homestead Decision from Bankruptcy Court

by @ 10:58 am. Filed under Homestead

The December 26, 2005 edition of Massachusetts Lawyers Weekly has a front page story about a recent bankruptcy court decision that addressed the applicability of the homestead exemption to the proceeds from the sale of the protected house. “Judge: homestead exemption follows house-sale proceeds” involved a situation where a person filed for bankruptcy protection and then sold his homestead-protected house. The creditor argued that once the home was converted to cash, the homestead no longer applied (after all, it’s intended to protect the home, isn’t it?). The judge disagreed, saying (among other things) that the status of the property as exempt was fixed as of the date of the filing of the bankruptcy petition and a subsequent change in the nature of the property (i.e., from a house into cash) could not alter its exempt status. The attorney for the creditor indicated he will appeal this decision.

It is uncertain what application this case will have to non-bankruptcy situations. I doubt that a non-bankrupt debtor will be permitted to sell his homestead-protected home and then walk away with up to $500,000 in the proceeds at the expense of his creditors. Of course, logic and homestead law don’t exactly walk arm in arm, so we can’t be sure about that.

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