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Matrimonial Home

In ONtario, if one spouse files personal bankruptcy what happens to the matrimonial home if it is in the name of both spouses?

One Response to “Matrimonial Home”

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A licensed trustee said...

To begin – equity in a house represents an asset of a bankrupt’s estate. In layman’s terms, that means what ever money that is left over after a house is sold and the mortgage and other closing costs are paid, belongs to the bankrupt person’s creditors.

In the case where more than one person owns the home then the bankrupt estate is entitled to the bankrupt’s fair share of the equity. For example, if two people own the house jointly then the bankrupt is entitled to 50% of the equity.

In the case where the second person has not filed bankruptcy things can get complicated. Before filing bankruptcy, the person in debt shoudl consider whether or not a proposal will work for them – it avoids the issue all together.

If a proposal won’t work and the person files bankruptcy, their trustee will likely offer to “sell” the bankrupt’s half of the house to the other spouse. If the spouse can’t afford to “buy” it then the trustee will discuss whether or not the house should be sold. If the other owner and the trustee can’t agree the matter may go to Court so that a judge may decide what’s the best way to proceed.

In our practice, we’d strongly encourage the proposal if it is possible. Failing that, we’d try and refinance the house so that the non-bankrupt spouse can “buy” the bankrupt’s share.