Bankruptcy Court Rules Remainder Interests Not Subject to Homestead Exemption

Photo of Andrea Peraner-Sweet

In a “Chapter 7” bankruptcy proceeding, a debtor’s assets are liquidated, and the proceeds are divided among the debtor’s creditors. Some of the debtor’s assets, however, may be exempt from liquidation under various provisions of federal or state law. One such exemption is created by the Massachusetts Homestead Statute, M.G.L. c. 188, §§ 1, et seq. The Homestead Statute protects a debtor’s home from most creditors, subject to certain restrictions. To qualify for this “homestead exemption,” the debtor must be an owner of a home who occupies the home or intends to occupy it as a principal residence.

An “owner” under the Homestead Statute, can mean a sole owner, joint tenant, tenant in common, tenant by the entirety (i.e., a married couple), life estate holder or holder of a beneficial interest in a trust. See M.G.L. c. 188, § 1. A holder of a remainder interest, however, is not an “owner” within the meaning of the Homestead Statute, and thus does not qualify for homestead exemption, according to a case decided in January by the U.S. Bankruptcy Court for the District of Massachusetts.

In In re Bertone, No. 12-12071-WCH, 465 B.R. 5, 2013 WL 364650 (Bkrtcy.D.Mass. Jan. 30, 2013), a bankruptcy proceeding brought pursuant to Chapter 7, the debtor’s father had transferred a remainder interest in his home to the debtor while reserving a life estate for himself. The debtor claimed a homestead exemption over the home. The Bankruptcy Court ruled that the debtor was not an “owner” within the meaning of the Homestead Statute because the Statute specifically enumerates six types of “owners,” and holders of remainder interests are not among them. Thus, the Bankruptcy Court reasoned, the Legislature intended to exclude holders of remainder interests from the protections of the Homestead Statute. The Bankruptcy Court’s decision in Bertone followed and relied upon a prior decision of the Bankruptcy Court, In re Gordon, 479 B.R. 9 (D.Bkrptcy.Mass. Aug. 28, 2012), in which the Court similarly ruled that homestead protections are not available to holders of remainder interests in the context of a Chapter 13 bankruptcy proceeding.

To review the author’s biography or find his contact information, click here.


Fitch Law Partners LLP reports news and insights on complex litigation topics. Clients, colleagues and friends may receive The Fitch Briefs by signing up here.