Why is marital home not part of bankruptcy?

January 28th, 2016 by Questions

If one spouse declares bankruptcy but the marital home is in the name of the other spouse, why isn’t the home part of the bankruptcy?

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One Response to “Why is marital home not part of bankruptcy?”


January 29, 2016 at 11:40 am, Doug Stuive, CA | Trustee | CIRP said:

In the same way your spouse’s debts are not your responsibility, your spouse’s assets do not automatically become joint property simply because you are married. However, depending on the circumstances the home may in fact be part of the bankruptcy proceedings.

The bankruptcy trustee is responsible for reviewing the affairs of the bankrupt individual and will investigate whether the matrimonial home should be an asset that the trustee has an interest in for the benefit of the creditors. In general the trustee will determine whether the home was always in the name of the spouse and why that might have been the case. They will look at whether the spouse transferred their interest in the property to the non-bankruptcy spouse, when that occurred and for what reason. The trustee will also determine the state of the marriage to make sure there is not a separation or divorce pending which would affect the trustee’s interest in the property due to the equalization of the assets. The trustee may also need to determine if there is even any equity in the property as if there isn’t the presence of a matrimonial home is immaterial as there would be no value to the home for the creditors regardless of whether or not the bankrupt is on title.

Depending on the trustee’s findings there may be a case that the property should form part of the bankruptcy estate in some capacity.

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