Chapter 25 - § 25.9 • PROTECTING THE MARITAL INTEREST

• Jurisdiction: Colorado

§ 25.9 • PROTECTING THE MARITAL INTEREST

The injunctions granted under C.R.S. §§ 14-10-107(4)(b)(I) and -108(2) restrain the parties to a dissolution action from dissipating assets. The injunctions granted by Colorado law are often not sufficient to protect the marital interest if one party files bankruptcy. Accordingly, practitioners should consider other techniques to protect the interests of the client until final orders.

§ 25.9.1—Real Property

With regard to interests in real property not held in joint names, it is advisable to record in the office of the county clerk and recorder a notice of lis pendens immediately upon the filing of the dissolution petition. The lis pendens puts all third parties on notice of the non-titled spouse's interest in the property. If the lis pendens is properly recorded at the time a bankruptcy is filed, the trustee in bankruptcy will be forced to recognize the non-filing spouse's interest as an owner, not merely as an unsecured creditor. The distinction is made clear in In re Gawel, 67 B.R. 662 (Bankr. D. Conn. 1986), in which the court stated:

The defendant's [wife's] lis pendens was notice of an equitable interest that did not appear of record, recorded in order that subsequent purchasers or encumbrances should not henceforth take free and clear of that equitable interest. At the time the lis pendens was filed, the defendant equitably owned the interest that was later awarded her by the state court decree. That award could have been defeated by a prior transfer by the debtor if the lis pendens had not been recorded. Her status at the commencement of the marriage dissolution action was similar to that of a purchaser for value from the debtor who failed to record the deed immediately. The defendant's filing of the lis pendens was no more a transfer on account of an antecedent debt than would be a purchaser's recording of a deed within the appropriate preference period.

Id. at 665.

One court has held that appointment of a receiver also protects property by putting third parties on notice. In In re Ebel, 144 B.R. 510 (D. Colo. 1992), a husband and wife held title to a golf course as tenants in common. The golf course was marital property. A dissolution petition was filed. During the dissolution case, a receiver was appointed to operate the golf course. The wife's assertion of a marital claim to the entire golf course apparently was not recorded. The husband filed bankruptcy, and his creditors asserted that the wife's...