New Jersey bankruptcy attorney explains how to determine when one spouses asset is considered another spouses bankruptcy asset.
One criteria of a New Jersey chapter 7 bankruptcy filing is the value of the filing person’s assets. A person is entitled to a fresh start in a chapter 7. The fresh start allows a person to keep a certain amount of property to move forward with their life. However, there is a limit as to the amount of assets a person may own. Although, very unusual, if the value of the person’s assets is beyond the acceptable amount, the trustee may sell certain assets or a portion of various assets. The property that a person may keep in a chapter 7, is determined by bankruptcy exemptions, which is explained, in detail, in numerous other blogs.
Also, the value of a person’s assets may increase the amount that must be paid to creditors in a New Jersey chapter 13 bankruptcy case. If the debtor has substantially valued assets, he may be required to pay more money towards his general unsecured debt, such as credit cards and personal loans. The analysis as to whether a debtor must pay more money in a chapter 13, as a result of owning valuable assets, is based on the same application of exemptions that is used in a chapter 7 case.
Typically, the bankruptcy court and the trustee determine which assets the debtor owns by way of the legal instrument reflecting ownership of the specific asset. For example, the individuals on a deed reflects the ownership of that property and the individuals on an automobile title reflects the owners of the car. Furthermore, the person whose name is on an investment account, is the owner of the account and the individual’s name that is reflected on a bank account, owns the money in the account. However, there may be numerous exceptions to this rule. An example of one possible exception, is using all of Mary’s money to buy a house that is solely in the name of John.
Another exception to the typical determination as to who owns an asset pursuant to New Jersey bankruptcy law, is as follows. In a New Jersey divorce, a husband may be entitled to his wife’s asset, even though the asset is solely titled in his wife’s name. Per New Jersey family law, one spouse may have a right to a partial interest in the other spouse’s asset, although no portion of the asset is titled in that particular spouse’s name. However, please note that the ownership rights to various marital property depends on various factors and that one spouse may not have an interest in the other spouses asset, as a result of marriage. Typically, under New Jersey bankruptcy law, the right of such an interest is triggered after the filing of the divorce complaint.
For example, Mrs. Smith is the sole owner of an investment that she acquired during the marriage. Mr. Smith has a one half interest in the investment, under family law, and only he files for chapter 7 bankruptcy protection, two days after she filed a divorce complaint. Under this scenario, the chapter 7 trustee will consider as a bankruptcy asset, all of Mr. Smith’s interest in Mrs. Smith’s investment. Therefore, if he is entitled to 50% of her $50,000.00 investment, pursuant to family law, his chapter 7 trustee will bring his $25,000.00 interest into his bankruptcy estate, for analysis. Mr. Smith may apply his applicable exemptions to the $25,000.00, which may result in the trustee disbursing all or a portion of the funds to creditors. Please note that there are numerous exceptions to the above examples.
Robert Manchel, Esq., may be contacted, at 866 503 5644, to discuss all of your bankruptcy questions for the State of New Jersey.