Olivia owns a home in Salem, Massachusetts worth $650,000 with no mortgage. She recorded a Declaration of Homestead five years ago. She then files for Chapter 7 bankruptcy. Under Massachusetts law, which statement most accurately describes the homestead protection available to Olivia in the bankruptcy proceeding, assuming she elects Massachusetts state exemptions?
Correct Answer
B) Olivia can protect up to $500,000 in equity under her declared homestead; the remaining $150,000 may be available to the bankruptcy trustee
Under MGL Chapter 188, the declared homestead protects up to $500,000 in equity. Massachusetts is an opt-out state for federal bankruptcy exemptions, meaning debtors in Massachusetts must use Massachusetts state exemptions rather than the federal bankruptcy exemptions. Olivia's declared homestead protects $500,000 of her $650,000 in equity. The remaining $150,000 in equity above the $500,000 cap may be available to the bankruptcy trustee for distribution to creditors.
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Related Topics & Key Terms
Key Terms:
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A tie-in arrangement is an illegal antitrust practice in which a seller conditions the purchase of one product or service on the buyer's agreement to purchase a separate product or service.
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
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