Parties to a Bucks County divorce action often overlook the issue of their relationship as co-owners of real property. There is a major change in how a husband and wife own real estate together, after they are divorced. This change should be taken into consideration when dissolving a marriage in Pennsylvania, including Doylestown and Newtown, especially if one of the spouses has a significant amount of non-marital debt.
Co-Ownership of Property Before Marriage – Tenants in Common
Typically, when two people own property together, they hold title as “Tenants in Common.” A tenancy in common arises when two or more people own a piece of real estate together. Under the law, each individual is considered to have a separate and distinct ownership interest in the property. Because the ownership is considered separate and distinct, each individual’s interest is available to his/her creditors. Therefore, a creditor could attach a lien against an individual’s interest in a piece of real estate and force the sale of said property.
For example: Jane and John are unmarried and buy a house together. They own it as Tenants in Common. John then incurs a large credit card debt. After the credit card company receives a judgment against John, it could place a lien against his interest and force the sale of the property.
Co-Ownership of Property During Marriage- Tenants by the Entirety
However, in Pennsylvania, a married couple will own real estate as “Tenants by the Entirety.” When holding title as Tenants by the Entirety, neither party has an undivided interest in the property. Therefore, any debt solely in the name of one spouse cannot be attached to the real estate.
For example: If we change the above facts to make Jane and John married, and the credit card debt is in John’s name only, the credit card company would not be able to take any actions against the property, as John does not have a separate interest in it.
PA Divorce Changes Title in Ownership of Property
The problem arises when a married couple decides to divorce. A divorce automatically changes ownership of property from Tenants by the Entirety into Tenants in Common. This change possibly could affect a non-debtor spouse’s financial interest in a marital home. There are actions that can be taken to protect a non-debtor spouse, which is why you should always consider the way in which property is titled, when going through divorce proceedings.