Help please..on the road to a divorce

[kjrmom911]

Up until now I have posted all my questions in the chapter 13 forum. I am coming here because unfortunately we are going to be getting a divorce. We pretty much agree on everything but my concern is the house. I don't want it and my soon to be ex does. That is fine but he will not be able to refinance it and I doubt the bank will let him just assume it and remove my name. There is no equity in the house at all and we are stripping the 2nd in the 13. Here are my thoughts. What if we split our bankruptcy and I refile as a chapter 7? Would that relieve me of the liabilty of the house? Any advice is greatly appreciated. By the way, in exchange for giving up the house and any potential future equity he is agreeing to give up any claim to my government pension.

[LadyInTheRed]

Yes, filing a Chap 7 should release you of your liability for the house. The question that I don't know the answer to is whether the bank can or will foreclose if your husband can't qualify for the loan on his own. The loss of a co-debtor can be an event of default.

The other thing to consider is that in Califoirnia, a purchase money loan on a personal residence is a non-recourse loan meaning the bank cannot puruse the debtor for a deficiency.

You really need to sit down with your attorney and discuss your options.

[justbroke]

I don't have any specifics other than some thoughts. First, I'm sorry to hear that it's not working out, but the stresses of life can certainly put stress on a marriage.

Having wrote that, have you considered bifurcating the Chapter 13 and then converting to Chapter 7 (rather than a dismissal)? I don't know which is easier, but I was just wondering. The nice thing about a conversion is that your bankruptcy date relates back to when you filed the (converted) Chapter 13, plus you get to include any new debt up to the date of conversion! Something to think about.

As for property rights and being relieved of responsibility, the divorce decree will prevail regardless of whether you discharged the debt in a Chapter 7 (or a Chapter 13).

I would certainly speak directly on these issues to my divorce and bankruptcy attorney. You want to make sure certain things are done in the divorce decree so that you don't end up with any post-discharge liabilities.

[kjrmom911]

Justbroke- Thanks, yes I meant bifurcating the Chapter 13 and then converting it. I certainly don't want to dismiss the chapter 13 because that would leave him on the hook for the 2nd mortgage and back taxes that are being paid in the 13, yikes. I don't want to start a war. As for the divorce decree relieving me of responsibility, it will not relieve me of the liability on the loan itself. The bank can come after me if he defaults..yes he would be in contempt of court, but I don't think it would help me as far as financial responsibility. I was trying to avoid a lawyer because honestly I have no money, but I may have no choice.

Lady, can the bank foreclose on him just because I am no longer liable? He is current on the mortgage and will probably be able to remain so. If that's the case banks truly are dumb, but then again I think I have already learned that.

[LadyInTheRed]

Lady, can the bank foreclose on him just because I am no longer liable? He is current on the mortgage and will probably be able to remain so. If that's the case banks truly are dumb, but then again I think I have already learned that.

I have seen instances where the death of a co-borrower on a loan securing commercial property triggered a threat to accellerated the loan if the surviving borrower did not find a new co-signer since he could not qualify on his own. That isn't allowed after the death on a co-borrower on residential property. But, I don't know whether it is allowed after a co-owner's liability is discharged in BK. The divorce adds another layer of complication. I would hope that the bank would just keep accepting payments, but actions banks take don't always make sense. You really do need to work closely with your bankruptcy and divorce attorneys on all of this.