Judge Haines recently decided that a consumer was not entitled to a homestead exemption where the consumer had obtained a divorce several years earlier and had transferred his interest in his home to his wife in exchange for a payment of $50,000, in the case of In re Toppi. Toppi and his wife did not obtain divorce attorneys to help them settle their divorce issues. They relied upon a state court mediatior to assist them in resolving their divorce issues.
While they ended up with an amicable divorce, they did not tie the ex-wife's payment of $50,000 for the former homestead with a mortgage or any other "interest" in the real estate. As a result, when Toppi found himself overwhelmed with debt a few years later and filed bankruptcy, his homestead exemption was challenged by the Chpater 13 Trustee. Toppi and the Trustee engaged in a vigorous fight which Judge Haines concluded with his decision that the homestead exemption should not be allowed.
The lesson to be learned for future divorcing parties is to have any payment for an interest in a marital home be reflected by some legal "interest" in the real estate. Hopefully, divorce attorneys in Maine will pay heed to this disturbing decision and properly protect their clients' homestead exemptions by making certain that the party giving up the real estate in a divorce retains enough of an interest to maintain a homestead exemption in the property.