Real estate held in tenancy by the entirety cannot be foreclosed to satisfy debt of one spouse

Upon entry of judgment, a judgment creditor may wish to attach a judgment lien against real property owned by the judgment debtor. However, whether the judgment creditor is able to enforce its judgment lien and foreclose on the real estate may depend on how title to the property is held. Pursuant to Illinois law, any real property held in tenancy by the entirety shall not be liable to be sold upon a judgment entered on or after Oct. 1, 1990, against only one of the tenants, except if the property was transferred into tenancy by the entirety with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor’s ability to pay those debts as they become due. 735 ILCS 5/12-112.
 

Accordingly, under Illinois law, real property held in tenancy by the entirety cannot be sold to satisfy the debt of only one spouse. Rather, if a creditor obtains a judgment against one spouse but records the judgment against real property that is owned by the judgment debtor and his or her non-debtor spouse in tenancy by the entirety, the judgment will create a lien only as to the debtor’s interest in the property. While the tenancy exists, the judgment cannot be enforced. However, if the tenancy is terminated, for example by divorce or by the non-debtor spouse’s death, then the creditor may seek to enforce its lien against the property. 
 

Therefore, the judgment creditor should consider recording a memorandum of its judgment against the real property so that, in the event the tenancy by the entirety is broken, the creditor will have an enforceable lien against the property. The recorded judgment lien may prime a subsequent mortgage recorded against the property, but only once the tenancy is terminated. 
 

Contact a Chuhak & Tecson Banking law attorney when judgment liens are questionable.
 

Client alert authored by Amanda E. Losquadro (312 849 4123), Principal.