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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31765
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Hi, I need to file a Chapter 13 to cram down the value of a

Customer Question

Hi, I need to file a Chapter 13 to cram down the value of a rental property set for foreclosure sale next month. I don't foresee any potential problems (other than perhaps fighting over the fair market value of property)... EXCEPT for the fact that I own this property jointly with my ex-wife, who would not be filing along with me. I don't believe there's anything in the divorce settlement transferring ownership or control to me, although I've been the one actually managing and renting the property out since the divorce.

So here's my question... Can I cram down the value of this rental property through my Chapter 13 bankruptcy even though it's jointly owned with my non-filing ex-spouse?

If not, would it help if my ex-spouse quitclaimed title of the property over to me before filing?

I am somewhat concerned that the lender will fight a cramdown under the circumstances, as my non-filing ex-spouse is liquid and could probably afford to pay a deficiency balance.

The only Florida case law I've seen on this issue deals with property owned as a tenancy by the entireties, the rationale of which doesn't seem to apply to a property owned as a joint tenancy. If you can find any Florida case law specifically addressing my issue, I'll pay extra, as I haven't been able to find anything so far. Thanks.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 4 years ago.

Kirk Adams :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question. I'll be glad to assist.

Kirk Adams :

Generally, a cram down is only possible on jointly-owned property if both owners file bankruptcy in the same petition. This is so because the creditor has a right to seek payment from either of you for the debt, and if both owners don't seek a cram down of the mortgage loan, then the lender can't be prohibited from seeking payment from her.

Kirk Adams :

Also, having her transfer her property interest to you would only deal with the title to the property - - not the loan. She would still be obligated to the lender under the note even if she signs her interest in the land away.

Kirk Adams :

Also, "joint tenancy" and "tenancy by the entirety" are the same thing - - this means that whichever owner lives the longest is entitled to 100% ownership of the property. This type of ownership is an alternative to "tenants in common", which operates to transfer the owner's interest into his/her estate upon death - - and not to the joint owner.

Kirk Adams :

I'll try to find you a reported case and post the citation below. In the meantime, I was able to find this Orlando Bankruptcy blog that says a cramdown can't be done on jointly owned property/jointly mortgaged property IF both don't file bankruptcy:

Kirk Adams :

468 B.R. 419 (2012):

Kirk Adams :

This case says: "a Chapter 13 debtor may strip a lien pursuant to § 506 and § 1322(b)(2) of the Bankruptcy Code. The strip off or cramdown is only effective, however, upon the issuance of a Chapter 13 discharge, which only occurs when all payments are completed under a confirmed plan of reorganization, and only if each debtor has complied with the provisions of § 1325.

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Customer: replied 4 years ago.

Would it help if she quitclaims me the property before I file?

Expert:  Roger replied 4 years ago.
Hi - there was a little problem with the "chat" function, so I switched us to Q&A. Let me know if you need anything further. Thanks!
Customer: replied 4 years ago.

Very helpful, thanks!

Expert:  Roger replied 4 years ago.
No problem. Please let me know if you need anything further.