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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38129
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I am going to file a chapter 7. I hold a mortgage on a home

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I am going to file a chapter 7. I hold a mortgage on a home that I share with my ex-partner; he is not on the mortgage. We are both on the deed; I put him on the deed 4 years ago, after owning the home solely for 7 years previously. There is about $200,000 equity in a house with a 1st of 107,000 K and a 2nd of 10,500. I have about 23,000 in debt. Will he lose the house? Again, he is not on the mortgage, just the deed. I am the only mortgage holder. We have a joint tenancy in common with right of surviorship. We both live in the home. We are in North Carolina. I do not have a job; he is working but doesn't make much income. He has poor credit and cannot buy the mortgage which is a total of approximately $120K outright, and cannot get a mortgage loan with a bank. I need the money from the sale of the house to pay my debts. Will the bankruptcy proceed and will he lose the house. I do not want to make the house exempt.  The tax value on the house is $324K

Hello,

Bankr. Code 363(h) permits the bankruptcy trustee to sell jointly owned real estate, even though a joint owner has not filed for bankruptcy. The result of a sale would be that the excess equity would likely be split between you and your ex-partner 50/50 by the bankruptcy court. A similar result would occur, were the property sold by the lender, through a foreclosure sale.

So, when you ask if your partner will lose the house, unless he can bring the mortgage current, then the answer to that question is "yes." But, he won't lose his share of the equity, unless, you have other debts which are so great that they will use up the remaining equity in the property. If you do, then your unsecured creditors would receive the proceeds of sale and your ex-partner would receive nothing.

The choice for your ex-partner is simple: he must buy you out: refinance the property and remove your name from the deed and the loan, so that it is entirely his property. Otherwise, he may lose any economic value from the property as the result of your bankruptcy filing.

Please let me know if I can be of further assistance.
Customer: replied 3 years ago.

Does this matter if I am in North Carolina? The homestead exemption is $35,000. If the house sells for even $250K and the first and second mortages total 120K, and my total debts are $23K, won't there be quite a bit of money left over, even with the 3% the trustee takes, and the bankruptcy lawyer fees? I am approximating about $65-70K. Who gets that money after my debts are paid?

 

And, can my ex-partner contest or prevent the mortgage, and thus the house, from being included in the bankruptcy at the creditors' meeting? Can he make a case for the house not to be sold? I am completely penniless, other than about $2000.00 which I will use to pay for the actual bankruptcy. Also, if my ex-partner cannot buy me out or refinance, what happens to the excess money.

thanks for your responses

Customer: replied 3 years ago.

Does this matter if I am in North Carolina? The homestead exemption is $35,000. If the house sells for even $250K and the first and second mortages total 120K, and my total debts are $23K, won't there be quite a bit of money left over, even with the 3% the trustee takes, and the bankruptcy lawyer fees? I am approximating about $65-70K. Who gets that money after my debts are paid?


 


And, can my ex-partner contest or prevent the mortgage, and thus the house, from being included in the bankruptcy at the creditors' meeting? Can he make a case for the house not to be sold? I am completely penniless, other than about $2000.00 which I will use to pay for the actual bankruptcy. Also, if my ex-partner cannot buy me out or refinance, what happens to the excess money.


thanks for your responses

Does this matter if I am in North Carolina? The homestead exemption is $35,000. If the house sells for even $250K and the first and second mortgages total 120K, and my total debts are $23K, won't there be quite a bit of money left over, even with the 3% the trustee takes, and the bankruptcy lawyer fees? I am approximating about $65-70K. Who gets that money after my debts are paid?

 

A: Any money remaining in the bankruptcy estate at the close of the case, is returned to you -- unless your ex-partner convinces the court to pay some portion of the money to him -- under the legal theory that it would be unjust to pay it all to you, because your ex paid money and made improvements towards the purchase of the property.

 

And, can my ex-partner contest or prevent the mortgage, and thus the house, from being included in the bankruptcy at the creditors' meeting?


A: Based upon what you've disclosed, I don't see any grounds to contest the sale.


Can he make a case for the house not to be sold?


A: See above.


I am completely penniless, other than about $2000.00 which I will use to pay for the actual bankruptcy. Also, if my ex-partner cannot buy me out or refinance, what happens to the excess money.

 

A: The money will be returned to you at the close of the bankruptcy, and it will be between you and your ex-partner to decide how to split the proceeds.

 

Hope this helps.

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