Bankruptcy Rule 1016 provides that:
Under the new bankruptcy law, just like under the former law, the debtor can choose exemptions that are permitted under federal law or state law. With the Massachusetts homestead exemption now at $500,000 (the total federal exemption is a mere $18,450), the debtor is well-advised to create a homestead before filing for bankruptcy and then choosing the full Massachusetts homestead exemption. See In re Weinstein, 164 F.3rd 677 (1st Cir. 1999).
However, under the new bankruptcy law there are limitations on the size off the exemption. In this regard there are three exceptions that would prevent the debtor from claiming the full $500,000 homestead exemption:
- Acquisition of residence within 1,215 days of filing for bankruptcy. If the debtor has acquired his or her residence within 1,215 days (about three years and four month) of the filing for bankruptcy, the exemption that can be claimed is limited to $125,000. There is an exception to this exception, which if applicable would permit the debtor to claim the full $500,000 exemption: if the debtor acquired the residence within the 1,215-day period, but did so by way of transferring an interest from the debtor's previous principal residence (which was acquired beyond the 1,215-day period, and located in the same state) to the current principal residence (e.g., the sale of the prior residence in order to purchase the new residence), then the debtor can claim the full Massachusetts exemption.
- Reduction of exemption by the amount realized in a fraudulent transfer. If the debtor has fraudulently transferred property for the purpose of concealing it and intending to hinder, delay or defraud a creditor, the amount of the exemption will be reduced by the value attributed by reason of (e.g., the proceeds from) the fraudulent sale.
- Conviction of a felony. Certain felony convictions under defined circumstances can result in the exception being reduced to $125,000.