If someone owned a house with 4 brothers and sisters ( 5 people total) ..and each had a 20% interest in the property...What would happen if one of them filed for chapter 7bk? Could this whole house be taken or only the 20% interest?
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It depends
First, is the house paid for (that is, has no mortgage)? Part of the answer will depend on how the homestead exemption works (is anyone one of 5 living in the house?).
If the house is fully paid for, and 1 owner files bankruptcy, a few scenarios could play out.
1. As a practical matter, the trustee will approach the other 4 owners and demand to be bought out; meaning, they will probably need to get a loan for the 1/5 interest.
2. If that doesn't work for the trustee, he could conceivably sell it. Whether he can sell the entire house or only the 1/5 interest will depend on state law and how the home is actually titled. (joint tenancy, tenancy by entirety, etc).Last edited by HHM; 02-25-2010, 05:28 PM. -
no.... there is a mortgage on the house and there is a little bit of equity......ex...mortgage is $200,000 and value of the home is $245,000....so can the trustee come after the $45,000 or can he come after only $9000 as an example..and this person does live in the houseComment
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Well, I assume there is a homestead exemption. Does your states homestead exemption cover the equity? If yes, then there is nothing to worry about.
If not, the trustee would only be entitled to 1/5 of the equity. If that amount would end up being very small, then the trustee is not going to care.Comment
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The homestead has to be lived in by the individual filing for it to be claimed. IF that requirement is met, then the homestead is in effect and all is well.Originally posted by HHM View Post
If the individual filing does not reside, then the trustee can require a payin of the 1/5 interest amount by "someone", the debtor or the siblings can buy that amount back from the bankruptcy.
Definately an issue for a bankruptcy attorney to address and assess!Comment
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