How Joint Tenancy is Affected by Bankruptcy
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 it 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 Experts are often asked.
Can a jointly owned home be excluded from one owner's Chapter 7 bankruptcy if the payments are current?
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 are 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 happens to a property that is jointly owned with four owners when one files 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. 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 three owners.
Would keeping an ex-spouse’s name on the deed to co-owned property protect it against creditors?
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 one tenant, who has lost ownership, be responsible for association fees on a joint tenant property if the other tenant files for bankruptcy?
If there are association fees that have been accumulated on a joint tenant property , then one tenant would be liable to those fees even if he/she loses ownership of the property after the co-owner files for bankruptcy.
If one joint tenant files bankruptcy what happens to the other’s share of the property?
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 owned. It will also help individuals know what their rights and obligations are if one co-owner of a property files for bankruptcy. To be informed of the implication of bankruptcy on joint tenancy, it is a good idea to ask an Expert about your particular situation.