{"id":3526,"date":"2024-12-21T18:06:38","date_gmt":"2024-12-21T18:06:38","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/noncompliance-with-homestead-statute-not-fatal-to-chapter-13-plan\/"},"modified":"2024-12-21T18:06:38","modified_gmt":"2024-12-21T18:06:38","slug":"noncompliance-with-homestead-statute-not-fatal-to-chapter-13-plan","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/noncompliance-with-homestead-statute-not-fatal-to-chapter-13-plan\/","title":{"rendered":"Noncompliance with homestead statute not fatal to Chapter 13 plan"},"content":{"rendered":"\n
\n
Prevails on debtor\u2019s behalf<\/figcaption><\/figure>\n

A Chapter 13 debtor\u2019s failure to strictly comply with the Massachusetts Homestead Act by not naming his non-titled spouse on his declaration did not render his plan unconfirmable, a U.S. Bankruptcy Court judge has determined.\n<\/p>\n

The debtor, Richard A. Dicato, intentionally omitted his non-titled spouse\u2019s name from the declaration in order to protect her privacy.\n<\/p>\n

The Chapter 13 trustee, David A. Mawhinney, objected to confirmation of the plan, arguing that the debtor\u2019s non-compliance with the statute, G.L.c. 188, \u00a71, invalidated his homestead exemption.\n<\/p>\n

But Judge Elizabeth D. Katz disagreed.\n<\/p>\n

\u201cAs in [In re Zakarian<\/em>], anyone inquiring of the public record would be aware that the Debtor was claiming a homestead exemption in the Property as an owner of the Property and, therefore, there is no prejudice to any creditor,\u201d Katz wrote, referencing a 2017 ruling by U.S. Bankruptcy Court Judge Melvin S. Hoffman and noting that Dicato\u2019s declaration was in writing, identified the owner, was executed under penalty of perjury, and was recorded at the appropriate Registry of Deeds.\n<\/p>\n

\u201cGiven this material compliance, lack of prejudice to any creditor, and the [Supreme Judicial Court\u2019s] admonition that the Massachusetts Homestead Statute must be construed liberally in favor of debtors, the Court predicts that the Massachusetts courts would find that the Homestead Declaration is valid,\u201d Katz continued.\n<\/p>\n

The eight-page decision is In re: Richard Dicato, Jr.<\/em>, Lawyers Weekly No. 04-016-24.\n<\/p>\n

\u2018Only rational decision\u2019<\/strong><\/h2>\n

Debtor\u2019s counsel Holly H. Hines of Leominster described the ruling as the \u201conly rational decision\u201d under the circumstances.\n<\/p>\n

\u201cA bankruptcy debtor\u2019s homestead exemption should not be completely invalidated due to an intentional omission of a non-titled spouse from the debtor\u2019s declared declaration of homestead,\u201d Hines said. \u201cThe homestead exemption should be preserved to the fullest extent possible to protect the debtor, who is under great financial distress at the time [he] seeks relief from the Bankruptcy Court.\u201d\n<\/p>\n

David A. Mawhinney, the Chapter 13 standing trustee in the case, declined to comment.\n<\/p>\n

\n

\"StevenI think Judge Katz\u2019s opinion stands for the proposition that homestead declarations are going to be broadly construed in favor of debtors.<\/strong><\/p>\n<\/blockquote>\n

But Steven Weiss of Springfield, who was the Chapter 7 trustee in the case before it was converted to Chapter 13, and who also objected to confirmation on the same basis, said it was hard for him to reconcile Katz\u2019s opinion with the 2022 case of In re: Luu, Danny<\/em>.\n<\/p>\n

In Luu<\/em>, Bankruptcy Court Judge Christopher J. Panos found that a Chapter 7 debtor\u2019s failure to sign or acknowledge his homestead declaration under penalty of perjury as required by the statute resulted in the debtor forfeiting his right to homestead protection beyond the $125,000 automatic exemption.\n<\/p>\n

\u201cThere\u2019s a tension between a reading of the plain words of the statute with the philosophy that exemptions should be broadly construed in debtors\u2019 favor,\u201d Weiss said. \u201cI think Judge Katz\u2019s opinion stands for the proposition that homestead declarations are going to be broadly construed in favor of debtors.\u201d\n<\/p>\n

Worcester attorney Jacob P. Morris, who represented the debtor in Luu<\/em>, agreed that the two rulings are inconsistent.\n<\/p>\n

\u201cThe court did not give my client the benefit of liberally construing the homestead statute, as prescribed by the SJC in [its 1996 Dwyer v. Cempellin, et al.<\/em> decision],\u201d Morris said. \u201cI still do not agree with the decision in my case. There was material compliance with the statute. It was clear to anyone [who] looked up title to my client\u2019s property that he lived there and that he declared it his homestead pursuant to the applicable Massachusetts statute. No creditor was prejudiced by the minor shortcomings of Mr. Luu\u2019s recorded homestead.\u201d\n<\/p>\n

Morris added that since Luu<\/em>, he has prepared and recorded brand new homestead declarations for all Chapter 7 clients if there are any questions in his mind about compliance with the statute.<\/p>\n

Boston bankruptcy lawyer Jonathan M. Horne predicted Katz\u2019s ruling would have an impact on future cases.\n<\/p>\n

\u201cDespite courts liberally construing the homestead statute in debtors\u2019 favor, expect to see creditors and other parties continue to mount similar challenges following the recent exemption increase to $1 million, making the stakes between a valid and invalid declaration ever greater,\u201d Horne said.\n<\/p>\n

Dmitry Lev of Watertown said the easiest approach for real estate and bankruptcy practitioners to avoid traps like the one in Dicato<\/em> is to use the fill-in homestead declaration forms available on the secretary of state\u2019s website.\n<\/p>\n

More broadly, Lev described it as \u201cpuzzling\u201d that Massachusetts, with one of the most generous dollar-based homestead exemptions in the country, puts so many archaic pitfalls in the path of debtors seeking to claim the exemption.\n<\/p>\n

\u201cIt is equally puzzling that while our Legislature saw fit to double the declared homestead exemption earlier this year, the \u2018safety net\u2019 automatic exemption remains unchanged at $125,000,\u201d he said.\n<\/p>\n

Incomplete compliance<\/strong><\/h2>\n

Dicato acquired real property in Fitchburg in 2006 that he continues to occupy as his principal residence. He married two years later.\n<\/p>\n

On Dec. 19, 2023, Dicato executed a declaration of homestead, but the declaration did not identify his non-titled spouse.\n<\/p>\n

Two days later, Dicato filed for Chapter 7 bankruptcy, later converting the case to Chapter 13.\n<\/p>\n

On his Schedule A\/B, he reported his property as being worth $328,125 at the time.\n<\/p>\n

U.S. Bank National Association filed a proof of claim indicating that it held a first mortgage on the property for $121,424, leaving $205,700 in unencumbered equity.\n<\/p>\n

The debtor claimed on his Schedule C an exemption in the property in the amount of $203,870 pursuant to the Massachusetts Homestead Statute. His Chapter 13 plan proposed that he make 36 monthly payments of $100.\n<\/p>\n

The plan also proposed that Dicato promise to provide a 3-percent dividend to general unsecured creditors, which the debtor estimated at about $95,000, by paying a total of $3,225 to the general unsecured creditors under the plan.\n<\/p>\n

\n
<\/p>\n

In re: Richard Dicato, Jr.<\/strong>\n<\/p>\n

THE ISSUE: Did a Chapter 13 debtor\u2019s failure to strictly comply with the Massachusetts Homestead Act by not naming his non-titled spouse on his declaration make his plan unconfirmable?\n<\/p>\n

DECISION: No (U.S. Bankruptcy Court)\n<\/p>\n

LAWYERS: Holly H. Hines of Leominster (debtor)\n<\/p>\n

Joanne M. Zoto of the Chapter 13 Trustee Office, Worcester (trustee)\n<\/p>\n<\/div>\n<\/div>\n

Mawhinney, as Chapter 13 trustee, objected to the plan, asserting that it was invalid in light of Dicato\u2019s failure to identify his non-titled spouse on the declaration as required by \u00a75(a)(1) of the Homestead Statute.\n<\/p>\n

According to the trustee, even a liberal construction of the statute would not allow the court to ignore its plain language, rendering the declaration void.\n<\/p>\n

As a result of the allegedly invalid declaration, the trustee argued, Dicato had to provide a 100-percent dividend to unsecured credtiors under \u00a71325(a)(4) of the U.S. Bankruptcy Code.\n<\/p>\n

That section requires a Chapter 13 plan to provide a dividend to unsecured creditors at least equal to the amount that would be paid if the case were liquidated under Chapter 7.\n<\/p>\n

As the trustee pointed out, the plan payment would far exceed Dicato\u2019s disposable income should a 100-percent dividend be required, which would render the plan unconfirmable under \u00a71325(a)(6).\n<\/p>\n

Dicato, on the other hand, urged the court to construe the Homestead Statute liberally and determine that his declaration was valid.\n<\/p>\n

Specifically, he contended, his declaration complied with the material requirements of the statute and should not be invalidated solely on the technical ground that he did not identify his non-titled spouse.\n<\/p>\n

Liberal construction<\/strong><\/h2>\n

Without prior written case law involving facts identical to those in the case but predicting how Massachusetts state courts would rule if presented with the same question, Katz noted that the SJC in Dwyer <\/em>found that the state homestead exemption should be construed liberally in the debtor\u2019s favor.\n<\/p>\n

She also noted that the Bankruptcy Court in Zakarian<\/em> applied Dwyer<\/em> in holding that a homestead declaration that contained the essential material elements required by the statute was valid regardless of a lack of strict compliance with the statute.\n<\/p>\n

\u201cUltimately, the Court [in Zakarian<\/em>] found that the declaration substantially complied with the Homestead Statute because it identified each owner to be benefited by the declaration and stated that the debtor occupied or intended each owner to be benefited by the declaration and stated that the debtor occupied or intended to occupy the home as his personal residence,\u201d she said.\n<\/p>\n

Meanwhile, Katz continued, the court in Luu,<\/em> which invalidated a homestead declaration on grounds that it was not signed under penalty of perjury, suggested that the debtor\u2019s failure to identify a non-titled spouse in that case may not, on its own, have rendered the declaration void.\n<\/p>\n

\u201cHere, the Debtor\u2019s Homestead Declaration is in writing, identifies the owner (the Debtor), is signed and acknowledged under penalty of perjury by the owner (the Debtor) to be benefited by the homestead, states that the Debtor occupies or intends to occupy the Property as the Debtor\u2019s residence and was recorded in the appropriate registry of deeds,\u201d Katz wrote.\n<\/p>\n

Given such material compliance with the statute, she concluded that the declaration was valid.\n<\/p>\n

<\/div>\n","protected":false},"excerpt":{"rendered":"

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