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Tenancy by the Entirety - HELP

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    Tenancy by the Entirety - HELP

    I live in Illinois where tenants by the entirety is legal for real estate. I currently have a very large amount of credit card debt 150K+ and a upside-down mortgage on my home. I also have about the same amount of assets in the market. All is in my name, not my wife.

    Let's say I was to put my existing home on the market and purchase a new property. I used all of my existing assets to buy the new home and held title as tenants of the entirety with my wife.

    I now have 2 homes, one on the market and one I live in. I have no liquid assets and 150K in credit card debt.

    Six months later, my first house still has not sold. I can't afford payments on my cards and houses, I quit paying everything but my new primary mortgage (which is tiny because of the large down payment). Everything goes to collections. 12 months after purchasing the home I declare Chapter 7 by myself.

    Question: How does the court view my new primary residence with 150K in equity? Does tenants of the entirety trump all and I keep my home? Or does the court view my actions as intent to never pay back the debt and force sale of the home despite title?

    #2
    Here is a quote from p. 48 of the Nolopress Chapter 7 book that may help to answer your question:

    Tenancy by the Entirety States

    States that recognize some form of tenancy by the
    entirety are Delaware, District of Columbia, Florida,
    Hawaii, Illinois, Indiana, Maryland, Massachusetts,
    Michigan, Missouri, North Carolina, Ohio, Pennsylvania,
    Rhode Island, Tennessee, Vermont, Virginia, and
    Wyoming.

    Real estate (and personal property in some states)
    a couple owns as tenants by the entirety belongs to
    the marriage, rather than to one spouse or another.
    If both spouses file for bankruptcy, the trustee can
    use property held in tenancy by the entirety to pay
    creditors. If only one spouse files for bankruptcy,
    this property is generally exempt from claims for
    which only one spouse is liable. Because the property
    belongs to the marriage, one spouse cannot give it
    away or encumber it with debts on his or her own. The
    property is not exempt from debts the couple takes on
    jointly, however.

    In sum, if none of the filing spouse’s debts are owed
    jointly with the nonfiling spouse, property held in
    tenancy by the entirety will probably be abandoned by
    the trustee, because it cannot be taken and sold for the
    benefit of any creditor. We discuss this further in Ch. 4.


    Good luck.
    "To go bravely forward is to invite a miracle."

    "Worry is the darkroom where negatives are formed."

    Comment


      #3
      What 'Cat wrote... and a good plug for the Nolo book as it is explained throughout the book. (At least the the Chapter 13 Nolo guide, it is dispersed throughout.)
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        Right. But it can't be that black and white.

        For arguments sake let's say that the scenario I outlined above happened in 30 days time instead of over the course of a year. Or say that I quit paying back all debts even though I was capable, while keeping all assets in the bank, and then bought the home 10 days before filing for BK.

        Based on the except from the Nolo book, I would not have to pay back anything and get to keep my home with all the equity. That just doesn't seem correct to me. There must be more to the story.

        Where are the safeguards a trustee can use against defrauding the system in regards to tenants by the entirety?

        Comment


          #5
          Originally posted by xraymikek View Post
          Where are the safeguards a trustee can use against defrauding the system in regards to tenants by the entirety?
          This part of Bankruptcy law is definitely the gray area.

          There have been countless cases surrounding the transfer of otherwise non-exempt assets (liquid or not) into exempt assets just before filing.

          Some Courts will say that transferring a non-exempt asset (like cash) into an exempt asset (like your homestead) is okay. Others look to see if there was any appearance of fraud in the transfer (e.g. the day of filing, you transfer $$$ in cash by paying down your mortgage on your homestead).

          Your mileage may vary.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

          Comment

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