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 Dear
Bankruptcy Adviser,
My ex and I have been divorced since 2005. I signed
a quitclaim deed at that time, giving him the
home. However, I have just found out that my name
is still on the mortgage, and he is refusing to
remove my name from the paperwork. Regardless,
I am filing for Chapter 7 bankruptcy this month.
Will that effectively remove my name from the
mortgage? How will the lender handle the situation?
Will he have to refinance?
-- Laurie
 Dear
Laurie,
You ask some excellent questions, and I will be as forthright as possible. You see, at the time of your filing, the house will still be in your name.
This means that in the eyes of the bankruptcy trustee, your creditors and all other interested parties, the property is still an asset of your estate.
Please note that this question is very complex. Family law, bankruptcy law, tax law and your particular state laws will have to be explored in order
to give you a fully competent answer. My answer is based on some of the more basic issues you must address. At a minimum, you ought to speak to a bankruptcy
and family law attorney prior to filing your case.
Here are some things to consider: Because the property
is still legally in your name, you must include
it as an asset, just like your car, furniture
and any other property. As a result, your case
could face very tough and intense scrutiny.
Your ex also did a great disservice
to himself. Now that you must include this property
in your bankruptcy petition schedules, it can,
and likely will be, of great interest to the trustee.
Because the trustee gets paid when she administers
assets to creditors, she will look to seize the
percentage of the home's equity you are legally
entitled to claim. Your ex stands to lose the
property unless a settlement can be reached with
the trustee.
Let's say you owned a home with a balance of $200,000 and a value of $400,000. In most states, you were entitled to 50 percent of the equity. You decided
to transfer the title to your ex in order to simply be done with your marriage and move on with your life.
That would be fine, except now you are filing for bankruptcy relief. None of your creditors would likely have uncovered this transfer had you not filed
a federal document. As a result, your ex is likely going to have to come up with your legally-ascertainable right to the equity in the property. This equity
will be distributed to your creditors with a little piece going to the trustee as a payment for administering this asset.
Your ex-husband will have to either
refinance the property to get the cash to pay
off the trustee's demands or risk having the house
sold to satisfy creditor claims. Then your creditors
will get their piece of the pie, and you will
get your fresh start with a bankruptcy discharge.
Worrying whether your name is on the mortgage or title is not relevant to the main issue. All that matters is what the law states you are legally
obligated to report in your petition. With some exceptions, that will be the amount that can be distributed to your creditors.
Now, that could be a moot point if there is no equity in the property. However, that does not mean your ex-husband could have refinanced the property and
sucked out all the equity. Depending on the timing of that refinance, the trustee could raise an issue that could still jeopardize his ownership of
the home.
Please consult with an attorney before filing your case. It will be worth the cost to know whether you will be facing a huge uphill battle to achieve
the fresh start you seek.
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