David and Susan are married and own their home in Harford County as tenants by the entirety. Susan files for bankruptcy under Chapter 7. The bankruptcy trustee seeks to use the home to satisfy Susan's individual debts. Under Maryland law, which of the following outcomes is most accurate?
Correct Answer
C) The property is fully protected from the bankruptcy trustee because tenancy by the entirety shields it from one spouse's individual debts
Under Maryland law and consistent with federal bankruptcy law as interpreted by courts applying Maryland's tenancy by the entirety rules, property held in tenancy by the entirety is exempt from the bankruptcy estate of one spouse when the debt is solely that spouse's. Because neither spouse holds a separate, divisible interest, the bankruptcy trustee cannot reach the property to satisfy individual debts. The U.S. Supreme Court in Craft v. United States (2002) addressed similar issues, but Maryland's strong tenancy by the entirety protections — combined with the lack of a joint debt — shield the property. The exemption applies when the debt is not a joint debt of both spouses.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In a cooperative (co-op), the building is owned by a corporation, and residents purchase shares of stock in the corporation that entitle them to a proprietary lease on a specific unit. Residents are shareholders, not property owners.
Fee simple absolute is the highest and most complete form of property ownership, giving the owner unrestricted rights to use, possess, enjoy, and dispose of the property. It is of unlimited duration and fully inheritable.
Community property is a system where property acquired during a marriage is owned equally by both spouses.
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