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Joint Tenancy and Bankruptcy Questions

What is joint tenancy? When two or more people own a piece of property and have equal shares in the property it is called joint tenancy or tenancy in common. When an individual who is a joint tenant in a property plans to file for bankruptcy, he/she should be aware of how the bankruptcy may affect their share as well as the other owners’ share in the property. Not having this information can lead to a lot of confusion over the rights of the co-owners in a property in the wake of bankruptcy. Given below are common questions about bankruptcy and joint tenancy that are often asked to Experts.

Can a Tenancy in Common Property be Excluded from an Individual Chapter 7 Bankruptcy if the Mortgage Payments on the Property is Current and Paid Up to Date?

In most situations, individuals may be able to retain tenancy in common properties in a Chapter 7 Bankruptcy if the mortgage payments on the property is current and paid up to date. However, the individual may have to include the property along with all the other debts in the bankruptcy petition. The co-owner of the house, however, will many times continue to be liable for the mortgage of the house since he/she may not have applied for bankruptcy.

What would happen to a Property that an Individual has in Joint Tenancy with 4 People, if he/she has to File for Bankruptcy?

If an individual is a joint tenant in a property with four people, it may be assumed that 25% of the equity in the property would belong to him/her. In such a situation, if the individual has to file for bankruptcy, the bankruptcy trustee may force the individual to sell the property to get his/her 25% of the equity. If the property is not exempt and if the individual does not want the property to be sold, he/she may convince the trustee that he/she has already cashed in the equity on the property and whatever equity that is there on the property belongs to the other 3 owners.

Would an Individual be able to save a Property from the Creditors that he/she had Co-owned along with an Ex-Spouse if he/she leaves the Ex-Spouse’s name on the Deed of the Property?

When a couple gets divorced, any joint tenancy that they may have on a property gets changed to tenancy in common. In such a situation, keeping the ex-spouse’s name on the deed of the property may not protect the property as the creditors of the individual may be able to take land from a tenancy in common to repay his/her debt. The individual may only be able to save the property from the creditors who are not aware of the divorce.

Would an Individual be Liable to the Association Fees of a Property for which he/she is a Joint Tenant if he/she Loses Ownership of the Property after his/her Partner declares Bankruptcy?

If there are association fees that have been accumulated on a property for which an individual is a joint tenant, then he/she would be liable to those fees even if he/she loses ownership of the property after his/her partner files for bankruptcy.

In a Joint Tenancy, would an Individual’s Share on the Property get Affected if the Co-Owner of the Property Filed for Bankruptcy?

In most situations, if a co-owner in a joint tenancy or a tenancy in common filed for bankruptcy, it would not affect the share of the other owner on the land. The bankruptcy trustee would only take the share of the individual who has filed for bankruptcy and own the land with the other owner as a tenant in common. The trustee may also try to sell the land to the other owner. However, if the other owner does not agree to buy the land from the bankruptcy trustee, then the bankruptcy court may forcibly sell the entire property.

Understanding how bankruptcy can affect joint tenancy and tenancy in common can help individuals decide whether or not they want to include properties where they are either joint tenants or tenants in common in the bankruptcy. It will also help individuals know what their rights and obligations are if one of the co-owners in a property files for bankruptcy. To be informed of the implication of bankruptcy on joint tenancy, it may be a good idea to ask an Expert about your particular situation.

Ask a Bankruptcy Lawyer

FiveStarLaw
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Category: General
Satisfied Customers: 3311
Experience:  Bankruptcy Lawyer. Experienced.
9968427
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Recent Joint Tenancy Questions

  • Hi Lucy, this is kind of a follow up question... Assuming

    Hi Lucy, this is kind of a follow up question... Assuming I end of declaring BK, would my house I own jointly with my financee be "protected" IF title is switched from joint tenancy to tenancy by the entireties (remember, I live in VA)?
  • This is a Bankruptcy Law question: Our dad lived 33 years

    This is a Bankruptcy Law question:

    Our dad lived 33 years with this woman who produced a marriage document after his death. She died 6 weeks after him. More than 20 years prior to his death she executed a great deal of property transactions involving my dad's house, her mother's house and her daughter's house.

    Less than 30 days after my dad allegedly married this woman, the woman executes a loan using my dad's name, house, and credit (her credit was shot to pieces because she had several property defaults and foreclosures which occurred during the 12 months leading up to the alleged marriage).

    The girlfriend then buys a house for her mother who had just relocated to San Diego after retiring. The original deed of trust only lists my dad and his girl friend as the purchasers, as husband and wife. 9 months later my dad is quitclaimed off the property. He allegedly quitclaims it to his girlfriend, her mother, and her daughter. All documents when recorded are routed to this house where the girlfriend's mom is now living.

    One of the strange things about all of this is our dad told me and 3 other of my siblings that the girlfriend's mom was a smart frugal woman because she had saved so well that after her retirement she was able to purchase a house in California. He told us this many times. When we researched property documents we find he is on record as taking out a mortgage and buying the house, then 9 months later quitclaiming his interest while still being liable for the payments on the house.

    A similar situation occurred with the girlfriend's daughter's house,except she at least put some initial money into the acquisition of the property. However, 3 or 4 years later the girlfriend and her daughter get the house homesteaded and on that document the girlfriend states she is a single woman, head of the household and living on the property (she was living with my dad in his house). 10 years after this the daughter executes a will and living trust where she pours the homestead house and her now deceased grandmother's house (the house discussed above) into the trust.

    The problem is the girlfriend is still a joint tenant with her daughter on both properties. With the girlfriend's consent,both they are both put into the girlfriend's daughter's trust eventhough there was never a quitclaim executed giving the daughter sole title to the two houses. From this point the daughter on paper because of this trust appears to be the sole owner of these 2 houses.

    Less than 7 years later the daughter files Chapter 7 bankruptcy. Because the daughter's house was homesteaded and she took out 2nds and 3rds on her house, she was able to keep her house. The 2nd house that belonged to the now deceased grandmother is also retained because over $150,000 was borrowed against it so there is not enough equity in it. The first deeds of trust/mortgage payments were always paid up and kept current. There were defaults on the 2nd and 3rd mortgages on both properties.

    Since the girlfriend never quitclaimed her interest to her daughter, should she have been a part of the bankruptcy because of her half interest in both houses?

    Was it bankruptcy fraud for the girlfriend and her assets to be omitted from the bankruptcy action of her daughter since the girlfriend was still a joint tenant on both properties according to the rue chain of title?

    Please give applicable laws and caselaws with your answer
  • I have a question about joint tenancy in bankruptcy. Suppose

    I have a question about joint tenancy in bankruptcy.

    Suppose a mother bought a house in 2006. Later that year she put her son on title as a joint tenant.

    Seven years later the son files for bankruptcy. He is claiming his $30,000 homestead exemption on his own property in Utah.

    The mother's house has a $100,000 in equity. They were supposed to remove the son from title years before, but never did. The mother can claim her own $30,000 exemption on the house, but that leaves $70,000 in equity available for the son's bankruptcy court to seize.

    All of the equity came from the mother selling her house in California. None of it came from the son who was really just along for the ride.

    How does a bankruptcy court look at this? Is the mother going to eat a $70,000 loss because she forgot to remove her son from title and he filed bankruptcy?

    Or can she claim a higher percentage of equitable ownership? In a Utah divorce for example, equitable ownership is given. If one party brought the majority of equity to a property it isn't just split 50/50 at the divorce.
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