Protecting The Marital Home From Creditors

A creditor seeking to collect a judgment has many options. It can levy on a bank account, garnish the debtor’s wages or seek to sell any real estate owned by the debtor. However, there are rules and limitations on that process.

For example, a creditor may not seek to sell the debtor’s real estate to satisfy a judgment unless it has exhausted its efforts to locate and collect from the defendant’s personal assets. The creditor must obtain a court order finding that it has met this obligation, and must detail to the court what it has done to carry this out.

With that court order in hand, the creditor can proceed to schedule an execution of the real estate through the sheriffs office. But not so fast! As the Appellate Division recently decided, when that real estate is owned by husband and wife, and the judgment is only against one spouse, New Jersey law prohibits the forced sale of the property to satisfy the judgment. This is based on a statute which requires the written consent of both spouses in order to sell jointly owned real estate. The creditor may still levy on the judgment debtor’s interest in marital real estate but it cannot compel the sale of such property.

Proceedings under the Bankruptcy Code lead to a different result. In such cases, the bankruptcy trustee has the power to partition and sell real estate owned by husband and wife to satisfy the debt of the filing spouse.

Nonetheless, serious thought should be given to holding all real estate as tenants by the entirety if possible, in order to protect it from creditors.

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Charles D. Whelan III has been committed to excellence for over 30 years. With offices located centrally in New Jersey, he is able to provide businesses and individuals with excellent legal services.

Watchung Office

475 Watchung Ave, Ste 8, Watchung NJ 07069

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