By Alice C. Elwell
Posted Oct 27, 2008 @ 04:00 AM
The Plymouth county registrar of deeds says he’s been getting a lot more calls lately from people who want to protect their homes in case of a lawsuit or credit problems.
Last year, well over 1,000 people filed with the Plymouth county under the state’s homestead act, said John R. Buckley, Jr., the Plymouth County registrar of deeds.
Buckley said the homestead is a barrier against creditors forcing people out of their homes.
“We always tell people it’s one part of your estate planning.”
For $35, you can protect up to $500,000 in home equity, which would stave off unsecured creditors. The protection doesn’t extend to taxes, child support, prior judgments or mortgages, but a declaration of estate of homestead could keep the wolf at bay if you’ve overextended yourself on credit cards or fear a lawsuit.
“I did it,” said Jamie C. Stewart, a self-employed accountant who owns her own condominium in Halifax. “For short money, the homestead protects you from a lot of exposure.”
“You protect yourself from unfortunate circumstances if someone sued you,” Stewart said. She filed her own homestead years ago when the filing fee was only $10.
As a self-employed professional, Stewart wanted to protect herself from risk, and now she recommends it to everyone.
“I tell all my clients,” she said.
Pending legislation in the statehouse could give new homeowners an automatic $125,000 in homestead protection, according to William O’Donnell, Norfolk County registrar of deeds. But for now, it’s strictly voluntary.
The issue in filing a homestead is choosing whose name it will be recorded under, as the declaration can only be in one name. So when it comes to situations where there are more than one owner on the deed, Robert R. Pellegrini, Jr., a real estate attorney practicing in Bridgewater, advises his clients to weigh the risks of who is most likely to attract creditor’s attention.
“I use the rule whoever might have more to lose,” a call which he said couples usually can answer right away.
Pellegrini said those more at risk include business owners, someone who travels a great deal, someone with a “wacky sibling,” or a spouse who is significantly older than the other.
A person not listed on the homestead could potentially be attached, but Pellegrini said, “Practically speaking I don’t see that frequently.”
Buckley advises the homestead be filed under the name of the person most likely to be sued.
“The filing protects both parties, but only one name is allowed,” Buckley said. So it doesn’t make much difference who’s name is on the homestead, once a homestead is filed it also protects the spouse and any minor children that live in the home, Buckley said.
“A homestead allows people to continue to live in their homes, despite creditors trying to get access to it, but it doesn’t protect against foreclosure,” Buckley said.
In the case of a death or a divorce, homesteads are grandfathered until the property is sold, but Buckley advises the homeowner to file a new one to be on the safe side.
When it comes to refinancing, Buckley said it’s very complicated. Frequently there is language in a refinancing agreement that eliminates the previous homestead. “Look at the language and make sure it doesn’t take away the homestead right,” Buckley said, because some refinancing can remove the validity of a homestead.
With a homestead in place, Buckley said unsecured creditors can place a lien, but not force the sale of the home. Buckley said a lien expires after seven-years.
Also, if you sell your home, the equity is protected for up to a year until you put it toward a new home.
Mobile homes can also be protected with a homestead, but filing is a bit different. The protections is the same, but a different form is required, usually available at the local town clerk’s office. The homestead is filed with the town clerk, rather than the registry of deeds. In Middleboro Town Clerk Eileen S. Gates said she’s recorded about 300 homesteads on mobile homes, the bulk in Oak Point.
An added bonus for homes owned by couples comes with retirement. Both owners can file a homestead when they reach 65 years of age, and the protection increases to $1 million.
By Alice C. Elwell