The bankruptcy estate includes everything that the debtor owns at the time bankruptcy is filed. This would include property you own jointly with your spouse. However, there are restrictions on how jointly owned property can be liquidated (sold to produce cash). The federal bankruptcy laws allow the trustee (person who is responsible for distributing all the assets of the bankruptcy estate) to sell jointly owned property only if all of the following conditions are met:
•the property cannot be easily divided;
•selling just the debtor’s part of the property would produce significantly less money;
•the benefit of selling the property outweighs the harm it will cause the owner who is not bankrupt; and
•the property is not used to produce electricity, or natural or artificial gas.
All jointly owned property must meet this test to be sold when only one spouse files for bankruptcy. For example, if you and your spouse owned a checking account, it would be easy to take out half the money. On the other hand, it would not be as easy to split the house in which you both live. That would require you to move out of your house and find a new home with only half the money. But if you both jointly owned a car, the trustee could probably sell the car, and give your spouse his or her interest in cash.
For more information, see: 11 U.S.C. §§ 363(h), 541 (2015).