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Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26690
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Hello, I recently filed for chapter 7. My creditors meeting

Resolved Question:

Hello,

I recently filed for chapter 7. My creditors meeting is in less than 2 weeks.

My name is XXXXX XXXXX as a co-borrower on a mortgage + equity line for a home that I quit claim deeded my ex-wife (we were legally separated 2 years ago). The house was underwater at the time (and still is), but my ex-wife wanted it, so I gave it to her. She has been making all payments on time.

I did not list the home on schedule A because it is no longer mine. I also did not list the mortgage or equity line on any of the list of creditors because my ex-wife is making payments.

I'm now wondering if I've made a mistake. My ex-wife received a letter a few days ago from the bank we have the equity line with stating that restrictions have been put on the equity line. She doesn't care about the restrictions, but is concerned about her future ownership rights. She called to inquire and was told that the loan is considered by the bank to be in a state of bankruptcy and will remain that way until refinanced or paid off if I do not reaffirm it during my bankruptcy process. I don't understand how I can reaffirm a debt to a property that isn't mine. But, I also don't want my ex-wife to lose the house or have her credit affected because of my credit failure.

I would be most appreciative of any recommendation you could give me at this point. If things are left "as is" with my bankruptcy filing, can my ex-wife keep the home (I've read contradicting stories about this)? Will my bankruptcy affect her credit? Should I have tried to reaffirm the loans (even though the property isn't legally mine)?

Thank you,
Marc
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Roger replied 1 year ago.
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

One thing you need to make sure is understood is that you can still be responsible for the debt/mortgage even though you don't own an interest in the property - - these are two separate things. Thus, even though you deeded her your interest in the property, you are still responsible for the debt.

Thus, you should have listed the debt/loan in your bankruptcy schedules, and you likely need to amend your schedule to make this change.

If you add the loan to your schedules, you will be relieved of your obligation to pay the debt, but she will still be responsible for the loan. There's no need to reaffirm the debt unless you want to continue to be responsible for the debt. Also, her ownership of the property should not be impacted by your filing.

Her credit report will likely show that this joint is in bankruptcy, but there will be no bankruptcy filing on her report, so it should not impact her much - credit-wise.
Customer: replied 1 year ago.

Hi Kirk,


 


Thank you very much for your reply.


 


If I do not amend my paperwork, what would the repercussions be to me (other than still being responsible for the debt)? And, what would the repercussions be to my ex-wife?


 


Also, you mentioned that the property's bankruptcy status wouldn't affect my ex-wife's credit much... Any way to quantify "much"? And, will the joint property remain in bankruptcy status forever?


 


Thanks again,


Marc


 


 


 

Expert:  Roger replied 1 year ago.

If you don't list the mortgage loan in your bankruptcy, then you will not get a discharge from the debt - - which means that it will be as if you never filed bankruptcy as to this debt. Also, there should be no actual affect on your ex-wife because she hasn't filed bankruptcy.

What I meant by the bankruptcy not affecting your ex-wife "much" is that there should be no actual legal affect on her. BUT, the account would have a notation that it is in bankruptcy, which would appear on her and your credit report since the debt is joint. Your ex-wife certainly would have the right to clarify that it's your filing - - not hers - - and that she is still responsible for the debt. Thus, the only real affect on her would be having to explain why there's an account with a bankruptcy notation on her credit report.

Nothing should remain in bankruptcy forever. Instead, your interest in any joint property can be liquidated and sold if it has value - - that's really up to the trustee. Usually, the trustee doesn't go after jointly owned property unless there's a lot of equity/money in it.

Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26690
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
Roger and 4 other Bankruptcy Law Specialists are ready to help you
Expert:  Roger replied 1 year ago.

Hi -

I hope my post answered your questions, but if you need something else, please let me know. Thanks.

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