Filing for bankruptcy before a divorce simplifies the issues regarding debt and property division and lowers your divorce costs as a result. It’s a WIN/WIN to walk away with $0.00 debt.
Tenancy By The Entirety
A tenancy by the entirety is a type of real estate ownership reserved exclusively for married couples. There is no dollar limit $$$$$ on the amount of real estate equity protected.
Asset Protection – Unlimited Equity Protection
A tenancy by the entirety protects an unlimited amount of equity in real estate owned by married couples. For example, a married couple with real estate valued at $1,000,000 with a $300,000 mortgage can protect $700,000 in real estate equity.
How Much Is Exempt?
A tenancy by the entirety protects this married couples $700,000 in real estate equity. However, there is actually no limit on the amount of real estate equity protection in Pennsylvania.
Impact on Bankruptcy
This married couple can erase $200,000 in credit cards by filing bankruptcy and protect their $700,000 in real estate equity so long as the credit cards are in their individual names. Creditors of only one spouse cannot acquire an interest in property owned by tenancy by the entirety.
Divorce Destroys Tenancy By The Entirety
Divorce terminates the tenancy by the entirety protection and this newly divorced couple would be required to repay $200,000 in credit cards in full.
Bankruptcy Before Divorce
The best financial decision married couples on the verge of divorce can make is to file bankruptcy right away to erase $200,000 in credit cards, and split the $700,000 in real estate equity between themselves. Erasing the debt and protecting their equity is the best decision for their children and themselves.
The Bottom Line
Cooperation benefits both spouses on the verge of divorce. It’s much better to walk away with $0.00 debt, and split $700,000 in real estate equity. That’s a Win/Win. It’s free to chat with me about your options – you can call or text me at 215.551.7109