Even if only one spouse files for Bankruptcy, a Trustee is authorized to sell jointly owned property pursuant to 11 USC 363(h). The sale must be approved by the Bankruptcy Court and should be approved only if the sale of the Debtor’s interest would realize significantly less for the Estate than the sale of the property as a whole. The benefit to the estate, however, must outweigh the detriment to the co-owner. Lewis v Harlin , 325 BR 184 (Bankr ED Mich 2005). If your state recognizes a tenancy by the entirety, you may be able to protect jointly owned property from being sold if your spouse files for bankruptcy.

Tenancy by the entirety is a form of property ownership that protects property that is jointly owned by a married couple. In states that recognize a tenancy by the entirety, the ownership of the property is deemed to be by the married couple as a single entity, not as individuals. Approximately half of the states recognize some for of tenancy by the entirety to some extent. The degree to which it is recognized depends on property at issue. Michigan law, for example, provides strong protection for tenancy by the entirety for ownership in real property and certain types of personal property. Depending on your state, you may be able to protect jointly-owned property from creditors and a bankruptcy trustee if it is a tenancy by the entirety.