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If you have a divorce decree with an agreement of division of property, do the trustees have to honor that?
Anonymous6 views3 answers
If you have a divorce decree with an agreement of division of property, do the trustees have to honor that? Are they able to take over property that is allocated to the ex-spouse to pay my debts? If so, under what conditions does this occur?
As a general rule, the Bankruptcy Trustee will not be able to take override the state court's division of property. However, if the trustee believes that the debtor voluntarily transferred property to the ex in order to keep it away from creditors, then the Trustee will attempt to undo the divorce decree.
I am presuming that your question involves certain property (house, car, and the like) as opposed to an award of funds for interest in property.
The divorce decree only fixes your interest in the property. For example if there was a house that was previously held as tenants by the entirety, that would, during the marriage be exempt from sale by your spouse's creditors. Absent action by the court, upon divorce such property would be converted, by operation of law, to tenants in common, and creditors of your former spouse (and therefore the bankruptcy trustee) would be able to reach his/her interest (or your creditors be able to reach your interest). Section 363 of the Bankruptcy Code allows bankruptcy trustees to sell jointly held property in certain circumstances, including where non-bankruptcy law would allow the sale. In Virginia in many circumstances a creditor can file a complaint to sell jointly owned property, so a trustee would likewise be able to sell the same types of property with permission of the bankruptcy court, but would have to pay your "share" of the sale to you. While many bankruptcy cases are "routine" the question you asked presents questions of 1) divorce or family law, as to the nature of the allocation by the court, 2) bankruptcy law as to the applicability of Section 363, and 3) general debtor/creditor state law to ascertain the non-bankruptcy ability to sell joint property. Each of these inquiries are by necessity fact driven and you should contact an attorney discuss those facts and then and only then rely on advice you are given. The answer provided her is simply a very, very generalized statement of what could or might happen.