__ What happens if an ex-wife files for bankruptcy while still a 1/2 owner of a house? __

[Blain]

My friend is living in a house he and his now ex-wife bought together. He's trying to get a loan for it in his name only but is hitting roadblock after roadblock.
He's received "O" help from her since she's moved out of state. She lived in the house before he moved back in, and got so far behind on mortgage payments that it was almost foreclosed on. My friend found out at the last minute about the impending foreclosure and paid up the payments that were her responsibility.

She's now pushing him to "get things settled" with the house or she'll file for bankruptcy. She has since remarried and having a tie to the house is now a burden for her with her new husband. It's something about her not being able to change her name because of her being on the house loan still. That's what she tells my friend anyway.

What would happen to him and his equity in the house, should she follow through with her threat of bankruptcy?

Any thoughts?

 

[PsychoAndy]

Originally posted by: Blain
My friend is living in a house he and his now ex-wife bought together. He's trying to get a loan for it in his name only but is hitting roadblock after roadblock.
He's received "O" help from her since she's moved out of state. She lived in the house before he moved back in, and got so far behind on mortgage payments that it was almost foreclosed on. My friend found out at the last minute about the impending foreclosure and paid up the payments that were her responsibility.

She's now pushing him to "get things settled" with the house or she'll file for bankruptcy. She has since remarried and having a tie to the house is now a burden for her with her new husband. It's something about her not being able to change her name because of her being on the house loan still. That's what she tells my friend anyway.

What would happen to him and his equity in the house, should she follow through with her threat of bankruptcy?

Any thoughts?

Depending on the state. FL has a huge exemption for bankruptcies. Basically, if you are rich and going broke, you buy a house and the creditors cant touch it.

Consider consulting a bankruptcy lawyer.

-PAB

 

[Blain]

Thanks. I told my friend to speak with a bank official and tell them of her plans. The bank doesn't want to let him refinance the house in his name only.
I also told him, paying for a consultation with a lawyer may be a good investment. Since the lawyer wouldn't have a dog in the fight, like the bank does.

 

[Vic]

The reason the bank doesn't want to help him to refi her name off the loan is because of the recently deliquent mortgage payments. Even though those payments were the ex-wife's fault, his name is still on that loan and he is considered responsible. Until a couple of years of good payment history has been re-established (especially if an NOD, or notice-of-default, was filed), no competitive lender is going to approve him. If he has excellent compensating factors, like substantial equity in excess of 50%, there may be alternative programs available, but even then an approval would be dicey and the rate would be higher than market.

If his ex-wife is pushing him to "get things settled," there may be something he can do right away to protect himself. Have her sign off the house. If no monies are involved, it's usually just a simple thing at the local title company. Her name would still be on the existing mortgage, but she would no longer have any legal claim to the house, and it should not be involved in any bankruptcy she might file.

Tell your friend I wish him luck.

 

[Blain]

They lived in the house about two years before she decided that she "didn't want to be married anymore". They don't have 50% equity at all.
My friend has been living back in the house for about 5 or 6 months now, plodding along building a history of on-time payments under his name. Would printed e-mails of her threats of bankruptcy be leverage in his favor with the bank? It seems that the bank doesn't want let her off the loan because of her responsibility. But by threatening bankruptcy, she's showing her intent on not being responsible.

Their divorce decree says that she will live in the house (and pay the bills), until the house sells, then split the equity. The problem was that she was using it as a "base" when she was in town. All the while falling behind on the payments as well as utilities. She really didn't want to get the house sold because it was a cheap "crash pad" when in town. She let the grass get overgrown, wouldn't keep appointments to meet with the realtor, etc. etc.
Since she's moved out of state, the house is an inconvenience to her now. She also told my friend to only contact her through her parents, who are local here.
He has conducted himself very professionally in trying to come to some kind of resolution to this matter. While she dodges his contacts and demands things from him out of the blue.
He has had way more patience with her than I would have.

 

[Vic]

Your friend needs a lawyer

As for the house, because she owns a portion of the equity, it sounds like his best option would be to sell it and pay her off and out of his life.

 

[RossMAN]

Your friend should definitely consult a Bankruptcy Attorney before it's too late.

The bank could really care less if they were shown those e-mails threatening bankruptcy. I'm hoping the husband has a good income, low debt, excellent credit history and there's some equity left in the house. If all of those are true AND the wife is willing to sign off the deed of trust, he could re-fi paying off the house, remove her name from the deed of trust and get the mortgage in his name only.

 

[Mister T]

sell the house, ditch the bitch and start over again

 

[ToBeMe]

My "ex" did that to me back in '87..................we were divorcing had a new house, two new vehicles, and a new boat. She took off, took the new car, the credit cards and most of the furniture and that's it. About 5 months later, she informs me she's filing bankruptcy! She's maxed out all the cards, is 3 months behind on the car and lost her job because she started "partying" and missed a mot of work. She was on the house yet as well as my truck and the boat, and I was on her car. Well, she just wanted out from under the credit cards but also wanted to bring me down with her so she wouldn't sign off on any of the other property unless I arranged a loan to avoid bankruptcy or borrowed her the money to pay off the cards and bring the car current. I basicly had already said the hell with her, so, I told her no way and "do what you gotta' do"! Well, she did it...............I assumed the car and the house, boat and my truck as well as several C.C.'s which had my name on them too even though I wasn't aware of it! It took me nearly 5 years of not doing much and paying out almost everything I made, but I paid off the cards and the car & boat and made her look like crap for it!

I too have friends which have been in that situation and gone ahead and filed for bankrupcty, but in a way, I feel really good because being in business myself, I wasn't going to let other people go unpaid and feel I did the right thing to this day. I have friends that told me back then, and some still today whom say I was stupid for assuming all her debt and not filing myself. One filed himself just two years ago.....he had a nouse, got layed off and couldn't make it.............I don't know what the laws are where you live, but, he and his family assumed the vehicle payments, but, they couldn't take their home so he has a nearly new home he is getting for as little as nothing! BUT............his credit rating is crap and they can borrow NO money............he already tried to buy a new truck and everywhere he tried, he was turned down! I guess the moral is, I may be a "chump" because I assumed all her debt when my ex wife filed bankruptcy and payed it all off, but, at least I have one hell of a credit rating and can basicly buy damned near anything I want if I need the money......................that's something you will probably never regain once you go the bankruptcy route............

 

[Blain]

ToBeMe,
Wow, very commendable on stepping up to the plate and hitting one out of the park!

If his ex-wife were to sign off any claim to the house, wouldn't her creditors see the equity in the house as theirs? I know she has other debts besides the mortgage payment. Are they able to get their hands on the house?

Mister T,
They did divorce, over two years ago. The house is the only thing that still ties them together at all.

 

[ToBeMe]

If his ex-wife were to sign off any claim to the house, wouldn't her creditors see the equity in the house as theirs? I know she has other debts besides the mortgage payment. Are they able to get their hands on the house?

Well, of course I can not speak nationwide I assume, but, in my case, no, the house was in both our names..........she simply signed her part off and it reverted to me. Now, I'm not sure what action the bank could have taken if I had ever defaulted, but, I assume none since she no longer had any intrest in the house or the loan after she signed off of both and the bank agreed..............Like others have said, and I stated, I can not speak for current bankruptcy laws or laws in your state...................this happened to me quite some time ago and is well in my past.......hell, the house was paid off and I have built another since then!

 

[Frenchie]

1. As far as refinancing, have your friend go to a mortgage broker. Preferrably one that deals with the secondary market (FreddieMac). A local Bankruptcy Attorney should have the name of a broker or two that he sends his clients to. They can usually get mortgages and refi.s for those that dont have the best of credit/salary/equity/liquidity.

2. As far as what happens to the house in bankruptcy, it depends upon the states bankruptcy exemptions and which chapter bankruptcy she is filing. If she files a 7, the Trustee may liquidate the equity in the house if it is over the state/federal exemption amount. Of course if you are dealing with FL or TX, the house is untouchable under the Homestead Exemption. If it is a 13, then no problem with the house unless she states her intent to let the creditor retake it, in which case it may be liquidated.

3. As far as the divorce decree, he should file a motion with the court to set up a contempt hearing. She should be required to repay him the amounts he had to pay the mortgage company (as well as his attorneys fees for the motion). The judge may let her off the hook for all payments after he moved in as that would be the equitable thing to do, but if he is to follow the letter of the Decree, she should still be liable.

4. The bank could really care less if they were shown those e-mails threatening bankruptcy. Pretty much. If it is a local bank or credit union, they may take it into consideration, especially if he has had good past relations with them, otherwise, they could give a rats @ss.

5. but, at least I have one hell of a credit rating that's something you will probably never regain once you go the bankruptcy route
Not true. It doesnt take long to rebuild your credit rating. I have had clients get new credit card, mortgage, and refi offers in as little as 6 months after discharge. A numer of them have been back to satisfactory credit ratings in under two years. It all depends upon whether you are a homeowner, how long you have resided at your address, the amount and number of creditors discharged, your income and length of employment, etc. If you have a strategy for rebuilding your credit, a good job and a home, you can have your good credit rating back in a few years.

6. Yes I am an attorney, and yes I do handle bankruptcy cases, although my knowledge is limited to PA and NJ specifically, and other states generally.

 

[Blain]

Thanks a bunch for the replies. I'm calling him now to prod him on.