New Massachusetts Homestead and Prior Debts

Since March, 2011, Massachusetts homeowners have had a new automatic homestead of $125,000, and if a homestead is filed and declared, protection of $500,000.

This new homestead law replaced the whole of the prior law.  It used to be that outside of bankruptcy, a homestead was only effective against debts contracted after the homestead.  (Inside bankruptcy this timing issue did not matter, see In re Weinstein).  So, what changed?

The old law provided:

[A homestead] shall be exempt from the laws of conveyance, descent, devise, attachment, levy on execution and sale for payment of debts or legacies except in the following cases:
(1) sale for taxes;
(2) for a debt contracted prior to the acquisition of said estate of homestead;
(3) for a debt contracted for the purchase of said home;
(4) upon an execution issued from the probate court to enforce its judgment that a spouse pay a certain amount weekly or otherwise for the support of a spouse or minor children;
(5) where buildings on land not owned by the owner of a homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand;
(6) upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity.

The new law removed the prior debt exception and made it only applicable to liens:

An estate of homestead shall be exempt from the laws of conveyance, descent, devise, attachment, seizure, execution on judgment, levy and sale for payment of debts or legacies except as follows:
(1) for a sale for federal, state and local taxes, assessments, claims and liens;
(2) for a lien on the home recorded prior to the creation of the estate of homestead;
(3) for a mortgage on the home as provided in sections 8 and 9;
(4) upon an order by a court that a spouse, former spouse or parent shall pay a certain amount weekly or otherwise for the support of a spouse, former spouse or minor children;
(5) where buildings on land not owned by the owner of the estate of homestead are attached, levied upon or sold for the ground rent of the lot upon which they are situated; and
(6) upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity.

What this means is significant.  It means that a homestead can now be filed to jump ahead of past debts, as long as a lien for the debt has not been recorded against the home.  It also means that as of the effective date of the new mortgage law, every homeowner has an automatic homestead which protects against prior debts, as long as they haven't been reduced to judgments and recorded as lien (and aren't otherwise on the list of exceptions above).  This is a big change from past law and practice where one had to file bankruptcy to enjoy a "retroactive" homestead.  Now, retroactive homesteads can exist outside of bankruptcy, with the caveat that a homestead still must beat an execution lien in time to be effective.