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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My husband and I own a home jointly with my father, my husbands

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My husband and I own a home jointly with my father, my husband's brother and his wife. I believe the title is held as 'tenants in common' but it might also be as joint tenants. I want to find out what protection (if any) that we have against each other's liabilities in terms of protecting our property rights. Specifically, my brother-in-law has recently become disabled and is filing for social security benefits. He and his wife have no other assets (aside from the home) and may have to declare bankruptcy because they can't pay their bills. Is there anything we can do to protect our interest in the home if they file chapter 13 (reorganization) or chapter 7 bankruptcy?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 1 year ago.

cfortunato : Hi JACustomer,
cfortunato : 1) What is the current market value of the house?
cfortunato : 2) What is the balance on any mortgages for the house?
cfortunato : 3) Who lives in the house?
cfortunato : 4) Have your brother-in-law and his wife lived in the h
cfortunato : lived in Missouri for at least the past 2 years?
cfortunato : 5) Have all 5 owners contributed to the home's equity (mortgage payments, taxes, improvements, upkeep, etc.)?
cfortunato : (Sorry for all the questions.)
Customer:

The house is unusual so it's hard to say with any certainty what the current value is, but I'll give some answers that should be in the ballpark

Customer:

1) market value aprox $315k

Customer:

2) mortgage balance is around $215k (10 yrs into a 30 yr mortgage)

Customer:

3) living in the home are the 5 owners: me, husband, my father, my brother and sister in law. Plus ma and husbands 3 children

Customer:

4) all of us have lived in home 10+ years

Customer:

5) all contribute monthly toward equity/ general expenses and upkeep

cfortunato : Thank you for your response.
cfortunato : Given the information you provided, your house has approximately $100K equity.
cfortunato : After subtracting 5% cost to sell, that leaves equity of only $85K, which divided by 5 owners, leaves around $17K per owner.
cfortunato : If your brother-in-law and his wife file a Chapter 13 Bankruptcy, nothing will happen to the house if they are able to pay at least $19K over a period of up to 5 years, or if any of the other co-owners are willing and able to help contribute to this sum.
cfortunato : If this is not possible, you and your husband and your father will not lose your financial interest in the house - as the Bankruptcy trustee would the sell the house, pay off the mortgage, and then give each of you your share of the equity.
Customer:

Thank you for those answers, that does help somewhat. Our first priority is to make sure that we do NOT have to sell the house. It is not a very marketable property (9bdr, 6 bath, downstairs kitchen/living area) so its quite possible it could not be sold for $315k, especially with current mkt conditions. Does the 'pay at least $19K over a period of up to 5 years' part of your answer relate to the potential $17k per owner of equity or is the $19k based on something else? Hypothetically, if the total equity was only $50k instead of $100k would that change the amount they have to pay back through bankruptcy? Is there any other type of property ownership we can change to that would protect us from having to sell the house under any conditions? I'm also thinking about if Medicaid becomes involved with my brother-in-laws care as he is acutely ill, how will that affect his ownership stake?

Expert:  cfortunato replied 1 year ago.
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Expert:  cfortunato replied 1 year ago.

The form or type of property ownership does not affect whether or not the property can be sold if a Bankruptcy is filed.

The $19K = $34K minus the available $15K homestead exemption. $34K is the equity that belongs to your brother-in-law and his wife - if the house's total equity is $85K after subtracting 5% cost to sell, then each one of the 5 co-owners has $17K equity. ($17K is $85K divided by 5.)

If the total equity were $50K instead of $85K (after subtracting 5% cost to sell), the $19K would then be only $5K ($20K minus $15K homestead exemption). In this case, $20K would be the equity that belongs to your brother-in-law and his wife.

Sorry, but I have no familiarity with Medicaid rules (called Elder Law).

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 3 other Bankruptcy Law Specialists are ready to help you
Expert:  cfortunato replied 1 year ago.

I changed the answer in an attempt to make it clearer.

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