“A Trap for the Unwary:”  Bankruptcy Court Declares Debtor’s Homestead Deficient

In In re Luu, Danny Luu (the “Debtor”) argued that he had a homestead exemption in the amount of $324,960.00.  He argued that because he filed a homestead declaration on March 18, 2021—just two days prior to filing his Chapter 7 case—his home was afforded the protections of the statute.  The Chapter 7 Trustee (the “Trustee”), however, objected to Debtor’s position.  The Trustee argued, in part, that Debtor’s homestead declaration was deficient because it was not “signed and acknowledged under penalty of perjury.” 

The Homestead Statute is M.G.L. c. 188 (the “Statute”).  Section 5(a) of the Statute provides in relevant part that “[a] declaration of homestead shall be in writing, signed and acknowledged under penalty of perjury by each owner to be benefitted by the homestead . . .”  In Bankruptcy cases, a claimed exemption is presumed to be valid unless a party in interest objects.  Here, the Trustee objected as a party in interest, which brought the issue before Judge Panos. 

In reaching his decision, Judge Panos explored the policy behind the Statute.  Grounded in public policy, the Statute is liberally construed to “comport with [its] beneficent spirit of protecting the family home.”  Notwithstanding this, the decision at bar turned on the plain language of the statute.  The Statute plainly and unambiguously requires that any homestead exemption be signed “under penalty of perjury.”  This was lacking in Debtor’s homestead declaration, which proved fatal to his position.  Apparently Debtor used the wrong form to fill out the homestead declaration and, as a consequence, it was not notarized.  Judge Panos concluded that to rule otherwise would contradict the plain language of the statute. 

The outcome of this case reveals the real-world consequences of overlooking this requirement.  Debtor in this case did not comply with the plain language of the statute and therefore can only claim the automatic homestead exemption of $125,000.00 instead of the $324,600.00.  Certainly a harsh result, but it seems the court’s hands were tied given the underlying facts. 

About Erik McHale

Erik is an associate in the Mirick O'Connell’s Real Estate and Environmental Law Group and the Public and Municipal Law Group. Erik represents buyers and sellers in all types of real estate transactions. He also represents both commercial landlords and tenants in lease negotiations.
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