BankruptcyLawyerHonolulu: Tenancy by Entirety Issues and Hawaiian Homelands
PROPERTY HELD AS TENANCY BY ENTIRETY IN HONOLULU MAY BE EXEMPT AGAINST DEBTS OWED ONLY BY ONE SPOUSE.
By Honolulu Attorney, Brian Kawamoto
Hawaii state law provides for a "Tenancy by Entirety" exemption that could be claimed to exempt or protect your home, no matter how much equity exists, provided that only ONE spouse files for bankruptcy and provided that there are no joint debts with the non filing spouse - naturally title to the property must state that the home is legally owned by both husband and wife as "Tenants by the Entirety" and not as Joint Tenants, or Tenants in Common. If you don't know, obtain a recorded copy of your deed from any title company here in Hawaii, or go to the Bureau of Conveyance for one. If you qualify for this exemption it is essentially an unlimited one and is based upon the Hawaii Supreme court cases of Sawada v. Endo, and Security Pacific Bank Washington v. Chang. The Trustee's office will require a credit report from the non-filing spouse to prove that there are no joint debts (joint mortgage debt on the residence is ok because it is a secured debt on the tenancy by entirety residence) before the filing spouse will get a discharge, this is so because the bankruptcy estate’s interest in tenancy by entirety property is in whatever equity is available in the entireties property that can be liquidated for the benefit of the joint creditors of the debtor and the non-filing spouse. If there are no joint unsecured debts, the entireties property is exempt: protected from the trustee, see http://www.bankruptcylawnetwork.com/2010/10/12/tenancy-by-the-entireties-may-protect-property-in-bankruptcy-if-there-is-no-joint-debt/. If there are joint debts and only one spouse files, BEWARE as the trustee can sell the residence, see In re: Linda Williams No. 95-2969 (1997) where the trustee moved to sell the tenancy by entirety residence when only one spouse filed. For more discussion about this problem see the Qullen case which appears at http://www.mdd.uscourts.gov/Opinions/Opinions/Quillen%20Bankr%20Appeal%20Mem%20and%20Opinion.pdf). Also for the debtor to claim this exemption, the debtor must haved lived in Hawaii for the last 2 years to be able to claim this state law exemption. Naturally that the debtor must still be legally married and that no divorce decree should be forthcoming between the spouses. If you are thinking about filing for bankruptcy and own a home, find an experienced bankruptcy attorney who has handled real property ownership matters before.
Another reference source written by a Bankruptcy Judge regarding Tenants by Entirety problems when only one spouse files can be found at
HAWAIIAN HOME LANDS - This is an asset that the Trustee can take if there exists any non-exempt equity. To determine whether you can keep your residence you will need a qualified appraisal to determine what the fair market value is (usually its more heavily weighted towards the value of the improvements since the land is leased and not owned by the debtor) - thus use an appraiser familiar with valuing Hawaiian Homeland property. You can then determine what the equity is after comparing the appraised value with the outstanding loan balance and your attorney can tell you what is exempt or non-exempt based upon the information that you've gathered.
Date of this Article: March 2011
Disclaimer - It is advised that you consult a bankruptcy attorney or lawyer in your state when dealing with your individual situation as the bankruptcy laws are complex and changes from time to time, also every state has different laws, rulings and court decisions on bankruptcy matters.. Statements made here reflects the author's viewpoint for general reading purposes only and therefore should not be relied upon or considered as a legal opinion or legal advice for your own particular factual situation. Each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue.