Divorce in New York: I got the house. He filed bankruptcy. Now what?

Bankruptcy and Divorce in New York: When the Judgment of Divorce is not the final Word on who keeps the house
So you got the house in the divorce settlement and you are ecstatic. But hold on. This may not be the end of the story. Because if your spouse goes right out and files for bankruptcy, you could lose the house and other assets you acquired in the divorce settlement. How? Well, first of all, understand that divorce and matrimonial law are state laws, and bankruptcy is federal law. So the Constitution says that federal law is supreme to state law. What that boils down to is that the federal Bankruptcy Code will trump any decision that was rendered in a State court pertaining to your divorce. So even if the judge (a state employee) granted you the house in the divorce, but the divorce judgment is not signed at the time your spouse files bankruptcy, (it can takes months for the judgment to be signed even if the trial is over) the federal government (aka the Bankruptcy Code) can turn right around and take it from you. If the judgment has already been signed, then arguably your title in the property has “vested” and you may get to keep it. I don’t know. It depends on your particular story.
Most people are probably going to file a chapter 7 Bankruptcy and the chapter 7 trustee overseas this proceeding. It is the trustee’s job to “reduce to money” all property of the bankrupt debtor’s estate. If that means selling the house you thought you were going to get in the divorce settlement, that is what the trustee will do. What is “Property of the estate”? Property of the estate is defined as “all legal and equitable interest of the debtor in property as of the commencement of the case.”
What is a spouse to do? Well, there is not much a spouse can do if the bankruptcy is commenced before the judgment of divorce is signed. So it may be helpful to try to anticipate the bankruptcy and try to put some sort of lien on the property, or file a lis pendens – which is a notice to future litigants that the title is being disputed and that they are in danger of being bound by an adverse judgment. But if there is no judgment of divorce, the Bankruptcy court will probably still allow the house to be included in the bankruptcy estate.
If the property is held as “tenants by the entirety” or “joint tenants,” then the trustee could order a sale of the property and give the non-debtor spouse a share of the proceeds if there is anything left over after paying creditors.
The good news is that child support, alimony and custody are still issues that the Bankruptcy laws do not affect. In other words, child support and alimony cannot be “discharged” in bankruptcy and even if your spouse files bankruptcy, he or she is still liable for any ordered child support. Of course these orders can be modified under certain circumstances. So, in short, even if you lose the house, you will still get your alimony and child support.