ex is filing Chpt 7 - her name is on the mortgage

[KC511]

My ex is gettig ready to file bankruptcy. The divorce papers stated that I had to put the house on the market and we split the equity when it sells. I live in the home with the kids and have kept my payments current. What protection do I have against the bankruptcy court taking the house? I live in Missouri.

[tcreegan]

Hi KC511,

The way I see it, it depends on how much equity there is in the house. In Missouri there is a 15K homestead exemption. But the D-court has ordered a split. So for there needs to be over 30K for the BK trustee to force a sale, probably more like 40K (the BK only gets his half)

If the equity is less than this, his liabilty to pay is discharged. You remain on the hook for the mortgage.

There are some other complications regarding whose name is on the title/deed but we need one of the experts to weigh in on this....

AND...I am by no means an expert on how divorce law intersects with BK law!! Get a second opinion, preferably from your attorney....

Tom in Colo

[KC511]

Hi tcreegan,

There is probably around 100k+ in equity in the house. She says she owes about 40k to creditors. Does this mean that the BK trustee would have to get atleast 80k for the house and I would get the other 40k in equity? Thanks for your reply.

[FishersMike]

I am by no means an expert, new to the B/K thing, but I am fairly good with numbers.... normally LoL

Based off the information above, it seems if the equity in home is worth $100,000 - and the exemption for two is $30,000 - that they can take 1/2 of the left over $70,000 - leaving you with $35,000 and having $35,000 to pay her creditors.

But I could be wrong.

[KC511]

Does this exemption still apply to me since the property was purchased when we were married? If I read it correctly it would exempt the property against debts owed by her.

MO Exemptions
Property held as tenancy by the entirety may be exempt against debts owed by only one spouse
In re Eads, 271 B.R. 371 (Bkrtcy. W.D. Mo. 2002)

[tcreegan]

Hi again KC,

Since you are divorced, I don't think you can use the tenancy by entirety....

If there is 100K in equity you can be assured the BK trustee is going to force a sale. Secured lienholders get paid, the rest is half is yours, half is hers per the divorce settlement. You get paid your half, her half goes into the BK estate, where she gets 15K exempt (she can keep) the rest goes to pay her creditors.

Anyhow, that makes sense which doesn't always hold in BK matters.....

Tom in Colo

[DebtEnder]

If there is 100k of value in the house I would expect it to go like this. Sale is forced by BK trustee, whatever profit it sells for, after selling cost and whatnot that gets split 50-50. Her 50% would then have 15k taken out as part of the exemption, if she uses it, or can. Your 50% is yours without any interference from the BK court. Of course in this situation I would be very sure just how much equity you have in the house. What you paid into it does not equal what you have to get out of it. In this case showing the house has perhaps only say, 30-40k in equity could be very good. As in that case 40k minus agent fee's and such could put total money to be gotten out around 30k. That splits 50-50 leaves only 15k on her side, which she exempts anyways. BK court gets nothing. As such TT would not pursue it.

[KC511]

In this economy who knows what the house can sell for. The last appraisal on the house had it at 125k more than what is owed however that was before the market dropped out. I had suggested to her that I try to refi the house and give her 30k and she sign a quit claim deed so I can take her name off of the house. She feels she is better off filing bankruptcy. Do I have any avenue through the courts to present this as means for her to be able to avoid bankruptcy and she is just choosing not too?

[newbie2]

In this economy who knows what the house can sell for. The last appraisal on the house had it at 125k more than what is owed however that was before the market dropped out. I had suggested to her that I try to refi the house and give her 30k and she sign a quit claim deed so I can take her name off of the house. She feels she is better off filing bankruptcy. Do I have any avenue through the courts to present this as means for her to be able to avoid bankruptcy and she is just choosing not too?

It is her right to file for bankruptcy and the protection it offers her without your consent. I seriously doubt that any civil court would order her to not file bankruptcy.

[KC511]

I understand it is her right to file for bankruptcy without my consent. I would assume my children and I would have some rights to protect us from her reckless behavior that has brought her to the point of bankruptcy. Im looking for avenues that might allow my kids and I to not be forced out of the house or have to take less than market value for the house because of her actions.

[KC511]

I am by no means an expert, new to the B/K thing, but I am fairly good with numbers.... normally LoL

Based off the information above, it seems if the equity in home is worth $100,000 - and the exemption for two is $30,000 - that they can take 1/2 of the left over $70,000 - leaving you with $35,000 and having $35,000 to pay her creditors.
But I could be wrong.

Does this scenario leave me with 35k or 50k since Im supposed to get half of the equity that comes from the house. If she is getting the 15k exemption and the court needs 35k to pay off her debts.

[DebtEnder]

I would think you get half of the net profit. Her exemption only exist on her side. Your half can not be taken by the bk court.

However based on what you have said 115k a few years ago is likely not anywhere near 115k now. Get another appraisal done, or at least a bpo.

[KC511]

So assuming I have no protection from the bankruptcy and they are going to force the sale of the house through a bk trustee. How does this work? The house is already on the market. Does the trustee take over the listing and price it for the minimum needed to cover her debt plus my half of the equity or does it go to auction? Will my kids and I be able to live in the house until it is sold?

If she has the assets that cover all but 10k of her debt is the trustee only going to try and sell the house to cover her 15k exemption plus the 10k debt leaving me with just 25k from the house? In this scenario why couldnt I buy out that remainder of her debt and her exemption and keep the house?

[newbie2]

So assuming I have no protection from the bankruptcy and they are going to force the sale of the house through a bk trustee. How does this work? The house is already on the market. Does the trustee take over the listing and price it for the minimum needed to cover her debt plus my half of the equity or does it go to auction? Will my kids and I be able to live in the house until it is sold?

If she has the assets that cover all but 10k of her debt is the trustee only going to try and sell the house to cover her 15k exemption plus the 10k debt leaving me with just 25k from the house? In this scenario why couldnt I buy out that remainder of her debt and her exemption and keep the house?

I have no idea what a trustee in your district would do, but I do know this: Because this affects your home and your childrens home I would consult an attorney. It would be worth a bit of money in legal fees to make sure you are protected.

[tcreegan]

Hi KC,

If she has the assets that cover all but 10k of her debt is the trustee only going to try and sell the house to cover her 15k exemption plus the 10k debt leaving me with just 25k from the house? In this scenario why couldnt I buy out that remainder of her debt and her exemption and keep the house?

This is a very real possibility, the trustee only needs enough to pay costs of the sale (commissions, appraisal, etc) and enough to pay her unsecured creditors. There is incentive to get market value, the trustee gets a commission too....

You can live in the house for awhile, maybe a long while, the process of the BK ain't exactly fast....

You can always buy her out, from her before the BK or from the trustee after she files.

Like others have said, there is a lot at stake here and it effects you and the kids.
A good attorney earns their pay in a case like this....

Tom in Colo