(Closed) bankruptcy

posted 8 years ago in Legal
Post # 3
Member
2475 posts
Buzzing bee
  • Wedding: June 2010

He can file for bankruptcy.  It really has nothing to do with who all is on the mortgage.  I don’t really know what you mean by he would “file for bankruptcy on the house”.  He would just be filing bankruptcy in general, it’s not something house-specific.

ETA: Have they thought about trying to do a short sale of the house since it’s worth so much less?

Post # 4
Member
1135 posts
Bumble bee
  • Wedding: April 2009

I’m going to second Tulip on this one–you can’t file for bankruptcy as regards a specific piece of property.  You can file for bankruptcy as a declaration that you can no longer support your debt load, and then you become a debtor and all those you owe become your creditors–the mortgage company would be one of Roommate X’s creditors, along with whomever else he owes money.  This is something that your Fiance should look into because often Trustees will take control of assets in order to start satisfying creditors, and your Fiance needs to make sure that his share of the home is protected.  I used to work for my mom and aunt in the bankruptcy law firm, so if you have more specific questions, PM me.  Good luck to you and your Fiance, and I’m sorry you’re dealing with this.

Post # 5
Member
4480 posts
Honey bee
  • Wedding: March 2010 - Calamigos Ranch

Just because he’s filing for bankruptcy doesn’t mean that he’ll be relieved of the obligation to pay for his part of the mortgage (although his payments might be negotiated). My understanding is that your Fiance and his other roommate will become creditors along with the bank that holds the mortgage. (And I could be totally wrong about this!) I think your Fiance should consult with a lawyer to make sure that he is protected.

Post # 6
Member
2208 posts
Buzzing bee
  • Wedding: July 2010

The bad news is that you can’t prevent someone from filing brankruptcy.

The good news is that there is a somewhat decent chance your Fiance won’t lose money. Do any of you live in the house? Could you afford to buy out his interest? Is it worth A LOT less (like 20% or more less)? There are a lot of factors to consider.

I’m not a bankruptcy attorney, but I can tell you that it is a hard step and will impact all of his loan obligations, not just the house. If he goes through with it, and your Fiance doesn’t want the house sold for a big loss, you will probably need to hire an attorney.

Post # 9
Member
2208 posts
Buzzing bee
  • Wedding: July 2010

What that probably just means is that the house is his only or main debt. While bankruptcy can vary from state to state in terms of how the debtors and creditors are organized, it is at its core federal law, so the advice given here stands.

Or maybe the guy is just an idiot and doesn’t know what he is talking about. By filing bankruptcy, his creditors can go after many different kinds of assets. He could be in a world of hurt.

Post # 11
Member
944 posts
Busy bee
  • Wedding: June 2009

From what I’ve been told, once you marry your husband’s score will effect yours too so if he has bad credit now and going into the marriage it will effect your score too.  When my mom got remarried that happened to her, her new husband had a crappy score and it brought hers down and she had to build it back up slowly.

Post # 12
Member
948 posts
Busy bee

As a bankruptcy attorney, I agree with monitajb, that he probably means his only debt is the house. But you still can’t file any type of bk – 7, 11, or 13 – for merely a piece of property.  It will affect all of his other obligations (to the extent he has any) and under the BK reform act, a debtor must meet certain criteria to quality under chapter 7 (e.g., a “means test” – income must not exceed a certain level in relation to debt).   Further, bk of a debtor in a co-obligation situation (like your FI’s) will generally not affect the non-debtor owners’ obligation on the property. 

So if your FI’s friend files under Ch. 7 bankruptcy protection, his creditors have the right to immediately demand payment the co-signers on any loan (which would include your FI), according to the terms of the debt agreement. However, if your FI’s friend a Ch. 13 debt adjustment, a co-signer is protected if certain conditions are met (but it doesn’t sound as if he is planning to file under Ch. 13).  As long as the debtor is making the required payments under the Ch. 13 plan (of reorganization, the creditor cannot act to collect from the co-signer(s). 

Or like monitajb said, he could just be clueless and think he can file a bk to only address the house debt without really looking into the filing laws.

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