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Category: Bankruptcy Law
Satisfied Customers: 17248
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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How is a non filing spouses real property interest protected

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How is a non filing spouse's real property interest protected in bankruptcy?

For example, suppose husband and wife are on title to a property.
The husband files for bankruptcy. The wife does not.

The house is worth $300,000 with $100,000 in liens.
Each party could claim $100,000 of the equity.
A chapter 7 trustee could argue that he wants the non exempt portion of the husband's equity. The husband can claim Utah's $30,000 homestead exemption.

This give the following calculation:
$100,000 equity for husband
$24,000 selling expenses (estimated at 8% of the value)
$30,000 husband homestead exemption
$46,000 net equity available to the trustee ( I am assuming the wife doesn't have to be penalized for the selling expenses).

What protection does the wife have here for her half of the house? Can the trustee sue for a partition action? How would that work?


This would be a complicated situation, the non filing spouse would have to claim her share of the property and her share of the equity,m


if she can show that she has paid all the expenses and was the true owner by buying the home, it is possible she can claim more than 50% of the equity,


if that is not possible, the trustee would use the $46,000 amount or the 100-30 $70,000 balance.


The trustee would advise you whether you can refinance and give the $70,000 to the trustee,


or if you would have to sell the property to pay the trustee,


Another option is to have the spouse file as well, and she may be able to double the exemption.

Customer: replied 3 years ago.

the couple is married filing jointly for 30 years on their taxes. In Utah, an equitable property state, any court would rule they are equal owners.


So are you saying she has no protection then? The trustee has the authority to sell the property via partition action in court?

Unless she want to file a divorce and have the Divorce Court order her full possession of the house, the trustee could force the husband to sell the property to pay the equity to creditors, another option is to delay the bankruptcy and have the couple try to refinance or incur another mortgage to create less equity.

Another option is to have her file bankruptcy with him and double the exemption.

For long-term marriages, equitable may mean a 50-50 split, or the court may decide that it is fair to give one party more or less than 50% of the property.

Customer: replied 3 years ago.

Would the trustee get a court order that would order the husband to list the property for sale then? Or does the trustee hire a real estate agent?

the trustee would hire an appraiser and real estate broker, to try to get the best price, also the spouse would be allowed to buy it as well
Customer: replied 3 years ago.

Or the husband could decide he wants to keep the house and convert his Chapter 7 into a chapter 13 via a motion right?

yes, in a chapter 13 he would pay the non exempt equity over a 60 month payment plan.
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