My Husband Or Wife Is Filing A Bankruptcy… How Will It Affect My Real Property – Chapter 7

by Peter Orville, Binghamton Bankruptcy Lawyer

March 16, 2008

How will your real property be affected if your spouse files a Chapter 7 bankruptcy?

-In New York State, which is not a community property state, if the property is only in your name, and his name was never on the deed, then his filing Chapter 7 bankruptcy shouldn’t affect the property at all. 

-If the property is owned by both of you, then it depends what type of property it is, and how much (if any) equity there is in the property.

-If the property is claimed as your husband’s residence, and the equity (the actual market value less any mortgages and home equity loans against the property) is less than your spouses claimed exemption, then it is safe from the reach of the trustee.  Actually, if the property is jointly owned, and the homestead exemption is $50,000 (as it is in New York State) then there must be over $100,000 of equity in the property for the trustee to have an interest in it.

-On the other hand, if it is not your husband’s residence (a rental property, for example), OR if there is more equity than the homestead exemption,then your husband’s Chapter 7 trustee will now own your husband’s share of the property (to the extent it exceeds the exemption).  The trustee could sell the property and pay you your half interest (using your husband’s half to pay towards his creditors), or the trustee could ask you to make an offer to buy out his/her half interest.

-If your jointly owned property is in foreclosure, your spouse’s Chapter 7 bankruptcy will put a temporary hold on the foreclosure.  The foreclosing bank must then file a motion to lift the automatic stay to allow them to continue with the foreclosure action.  If the property is just in your name, your spouse’s bankruptcy will not, even temporarily, delay the foreclosure.

Next: How your spouses Chapter 13 will affect your real property.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

Last modified: February 14, 2013