Bankruptcy and Spouse’s (Matrimonial) House

| Category: What You Keep or Lose
Category: What You Keep or Lose

Question: My wife owns a condo in her name and mortgage in her name. I got married about 2 months ago and heard this is now considered a matrimonial home. If I declare personal bankruptcy and my wife sells her condo can they come after me or her for the equity in her house since I now live there? I dont want to cause any problems for her or myself.

matrimonial home and bankruptcyThe answer depends on who legally owns the matrimonial home in a bankruptcy.

Generally equity in a house is considered an asset of the bankrupt’s estate. This can get complicated when we are talking about a matrimonial home.

If the home is in the spouse’s name, and always has been, then you do not ‘own’ the asset and it will have nothing to do with you or your bankruptcy. They can’t come after you for money if you have filed for bankruptcy.

If however both spouse’s own the home, and only one files for bankruptcy, then things become more complicated. Your trustee will look to realize on your ‘share’ of the equity in your home. So if you own your home with your wife, then your trustee will need to receive 50% of the equity in your home for your bankruptcy estate.

One option would be to ‘buy out’ your share of the equity in your home (perhaps by taking out a second mortgage on the home). Another option is to consider filing a consumer proposal to your creditors where you repay your ‘share’ over a period of 3 to 5 years.

If neither of those options work, you may need to consider selling your home. If the spouse will not agree to the sale, the trustee can apply to the Court to decide on how best to proceed.

For further information, contact an Ontario Bankruptcy trustee for advice on how to deal with a matrimonial home.