At Beaupre Law, we frequently encounter clients who have questions about “homestead” and what it means for them as homeowners. Homestead, in essence, is a legal safeguard that offers special protections for homeowners during financial hardships, ensuring the preservation of their primary residences. In this article, we’ll Homestead laws in New Hampshire and Maine, and the protections that each state provides.
Understanding Homestead:
Homestead provides legal protection to homeowners, shielding their primary residences from certain creditors in times of financial difficulty. The primary objective is to prevent homeowners from losing their homes due to unsecured debts and judgments.
Homestead in New Hampshire:
In New Hampshire, homeowners can utilize a homestead exemption to safeguard up to $120,000 of equity in their primary residence from creditor claims and forced sale. If the homeowner is married, the exemption doubles to $240,000 (or $120,000 per person), even if only one spouse is on the title.
Notably, New Hampshire grants homestead rights to spouses, regardless of their presence on the title. When refinancing or selling the property, the spouse’s consent is required to release their homestead rights.
Obtaining the homestead exemption is automatic in New Hampshire; homeowners don’t need to take any specific action to acquire these rights. Additionally, transferring homestead property to a revocable living trust does not result in the loss of homestead rights.
The homestead exemption protects homeowners’ equity, up to the specified limits, from unsecured debts such as credit card bills, medical expenses, and personal loans. However, secured debts like mortgages, tax liens, and construction liens are not subject to the exemption, meaning that unpaid mortgage bills and overdue taxes can still lead to the forced sale of the home.
Homestead in Maine:
In Maine, the concept of homestead is closely tied to a property tax exemption known as the “homestead property tax exemption.” This exemption grants a tax break of up to about $25,000 for Maine residents on their property tax bills.
The homestead property tax exemption requires homeowners to file before April 1st in the first year of application. The exemption also applies to residences held in a revocable living trust.
In addition to the property tax exemption, Maine offers statutory exemptions that act similarly to New Hampshire’s homestead protection. Under Maine’s exemptions statute (14 M.R.S. section 4422), homeowners can protect up to $80,000 of equity in their primary residence, or up to $160,000 if there are minor dependents residing in the home. For homeowners over 60 or disabled, the exemption amount increases to $160,000, and it reaches $240,000 for older couples and surviving spouses.
These statutory exemptions are automatic and require no active filing if the homeowner has resided in Maine for 730 days before the commencement of a collection action or bankruptcy proceeding.
As in New Hampshire, the statutory exemptions in Maine safeguard homeowners from unsecured debts such as credit card bills, medical expenses, and personal loans. Nevertheless, the residence is not exempt from claims secured by real estate mortgages or other creditors, such as taxes and construction liens.
Conclusion:
Understanding homestead protections in both New Hampshire and Maine is vital for homeowners looking to safeguard their primary residences during potential financial crises or bankruptcy. These exemptions offer peace of mind and stability during uncertain times. While we hope that these protections are not needed, they can prove invaluable should someone face financial difficulties.