You might’ve heard a friend tell you that you need to “put your house in homestead” or “declare a homestead,” or something in that vein.

“Homestead” is a term used in bankruptcy or when you’re sued to indicate an exemption of assets that cannot be touched by creditors.

It doesn’t refer to crops, or making turning your house into a chicken farm.

When you get sued for your debts, or when you file bankruptcy, Massachusetts and Connecticut both allow your home to be protected, up to a certain dollar amount.

In Massachusetts, your house is automatically exempt up to $125,000. Read the full law here.

But if you “declare a homestead,” which means you file a piece of paper that says you’re declaring homestead, you can up that exemption to $500,000.

In Connecticut, the homestead act automatically exempts a house up to $250,000… But, there’s no “declaration of homestead” that you can do to increase that amount. So, Massachusetts is more debtor friendly.

Now, the amount they value is your interest in the house, minus the mortgage. So if your house is worth $300,000 but you only have $100,000 equity in it… then it still applies.

The Bottom Line

In MA, the homestead act means creditors can’t take your house if it’s worth under $125,000. If you file a declaration of homestead, that can be upped to $500,000.

In CT, the automatic homestead exemption is $250,000. Meaning, if you have a house worth under $250,000… creditors cannot go after it to fulfil their claims.

Read about other ways to avoid creditors.

The law is purposely designed to make avoiding creditors difficult, and punitive. You either have to file bankruptcy and tank your credit. Or negotiate your debt (and tank your credit.) Or put all your assets in irrevocable trusts or DAPTs and lose full access to them.