Difference between revisions of "Basic Principles of Property and Debt in Family Law"

From a family law perspective, the most important thing about owning an asset as tenants in common, which is how assets are owned after the spouses separate, is this idea of two separate interests in an asset. Say the family home is registered in only one spouse's name and that spouse goes bankrupt. If there has been a separation and each spouse takes a one-half interest as a tenant in common, the only part of the house that can be taken by the bankrupt spouse's trustee is the bankrupt spouse's one-half interest; the other spouse's interest in that asset will be preserved from the bankrupt spouse's creditors, and it doesn't matter who owns the asset on paper. This can be hugely important.

Family law lawyers describe the effect of a separation as "crystallizing" the spouses' interests in the family property because the separation makes each spouse the legal owner of one-half of the family assets in a way that is also binding on people outside the relationship, like creditors, trustees in bankruptcy, potential purchasers, and so forth. After a separation happens, all a creditor can lien or seize to secure or pay a debt is the debtor's half-share of an asset, regardless of whether the debtor was the sole owner or the joint owner of the asset before the separation.