How does bankruptcy affect home ownership? 12 Answers as of October 21, 2014

I am considering filing a Chapter 7 Bankruptcy case. I am about $13,000 in debt not including student loans which I understand cannot be discharged. All of these debts were acquired before I got married this year, and are by definition unsecured. I am a stay at home mom to three kids (2/3 from a previous marriage) and we survive on my husband's income. As of right now we cannot afford $2,000 to hire an attorney and my household income exceeds the state's threshold for pro bono help. I want to file on my own but I understand it is ill advised. Unfortunately, it may be my only option. My credit is already terrible, so I doubt this will affect it much. In the meantime, we are closing on a house in December. The mortgage is only in my husband's name, but the title will be in both of our names under Tenants by the Entirety. My question is: how will this affect my house? Can filing for bankruptcy automatically take away my house or leave it up for grabs? Should I just forego filing and try to work with the creditors?

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You filing for the bankruptcy should not affect your husband's ability to obtain a mortgage. I might be best to wait until after the closing to file.
Answer Applies to: Minnesota
Replied: 10/21/2014
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
Find the funds to hire a lawyer, find a cheaper one. I am not licensed to practice where title is take by Tenants by the Entirety. You risk losing the house.
Answer Applies to: California
Replied: 10/17/2014
Barnhart Law Office
Barnhart Law Office | Bruce C Barnhart
A married person can file an individual bankruptcy petition without the spouse. If married the filer is able to claim a homestead exemption on a residence. Given that you are not liable on the mortgage and assuming the equity in the house is below the exemption amount, a bankruptcy should have little or no affect on your house.
Answer Applies to: Nebraska
Replied: 10/17/2014
Ronald K. Nims LLC | Ronald K. Nims
One spouse's buying a house in joint name (in most states) means that the buying spouse is making a gift of a 1/2 interest in the property to the nonbuying spouse. Tenants by the entireties are generally protected from any creditor of one but not both spouses foreclosing on the house. I would advise filing bankruptcy before buying the house.
Answer Applies to: Ohio
Replied: 10/17/2014
Joseph Lehn, Esq
Joseph Lehn, Esq | Lehn Law, PA
In the State of Florida there is an exemption for Homestead. Therefore, it is protected from creditors. However, there are limitations in the amount of equity that can be exempted when property is purchased less than 3 years prior to filing the bankruptcy petition. Additionally, you could potentially use the tenancy by the entireties if you meet the requirements, and if only you file bankruptcy and as a couple you have no joint unsecured debt.
Answer Applies to: Florida
Replied: 10/17/2014
    D.J. Rausa, Attorney at Law | D.J. Rausa
    Wait to close before you do anything. The filing of bk may cause issues.
    Answer Applies to: California
    Replied: 10/16/2014
    Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
    I know that this is not really the answer you are hoping for, but with what is at stake you really need to retain a lawyer and seek personalized legal counsel. If you have the ability to purchase a home, then it seems to me that paying a lawyer to ensure that the home is well protected in a bankruptcy proceeding is, as they say, a "no brainer". Most bankruptcy lawyers will offer an initial consultation at no cost or obligation. Most bankruptcy lawyers will also be happy to work with clients to get the fees and costs paid through an installment payment plan. Please seek professional guidance if you are considering bankruptcy - it is not simple and it is often not very straightforward either. The peace of mind you gain will be worth the fees you pay for a knowledgeable and experienced lawyer.
    Answer Applies to: Colorado
    Replied: 10/16/2014
    Freeman Law Group, LLC
    Freeman Law Group, LLC | Derek Freeman
    First, it sounds like you need to shop around for another lawyer. It's possible that you could find one that charges a lower fee. Be cautious of rock-bottom fees though - the lawyer is probably charging a really low fee for a reason. As for the home, it seems strange that you would be buying a home and considering bankruptcy at the same time. But as long as you are not on the deed, and not on the mortgage, the house won't be considered yours. Even if you are on the deed, you can claim the homestead exemption, which is $60,000 in my state. This means that you can own up to $60,000 in equity and keep your house. Another option is to do a chapter 13. This will allow you to make payments toward your debt and still keep all of your assets, including the house. The benefit of chapter 13 over negotiating with creditors is that you have the protection of the bankruptcy court, and you can make interest-free payments to unsecured creditors. You will definitely want a lawyer if you file a chapter 13 bankruptcy. The lawyer's fee in a chapter 13 will be higher, but you can include it in the payment plan so it will be relatively painless.
    Answer Applies to: Colorado
    Replied: 10/16/2014
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    There are too many facts to really advice you on this site, but filing bankruptcy puts the house in jeopardy if you are on title as any equity is half yours. You may use a homestead exemption for that equity however. And although student loans are not dischargeable, we can often get the monthly payment to zero and out of default.
    Answer Applies to: New York
    Replied: 10/16/2014
    GARCIA & GONZALES, P.C. | Richard N. Gonzales
    In Colorado you are entitled to $60,000 equity in a home, unless you or your dependents are disabled, in which case the exemption is raised to $90,000. You can Google your state exemptions if you reside else where. Your home ownership is fine as long as your equity does not exceed this exemption amount.
    Answer Applies to: Colorado
    Replied: 10/16/2014
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    The problem I see with you considering bankruptcy is that it may be entirely unnecessary. I understand you can't pay your debts, but if you don't pay, the most a creditor can do is sue to collect. Since you don?t have employment, a court judgment won't allow a creditor to garnish your wages. As a result, it is unlikely any creditor will go to the trouble of suing you. But if a creditor does sue, you could probably settle for pennies on the dollar to stop the lawsuit from going through. Once a creditor gets a court judgment, it can put a lien on the house, but the creditor can only sit and wait to get paid with the lien until the house is sold or refinanced. Frankly, considering bankruptcy at this times appears premature, especially considering the amount of your debt. Most of my clients have $25K or more in debt & I won?t take cases with a lower amount of debt absent unusual circumstances. If you think of bankruptcy as your lifeline, it would be a shame to squander it before you really need it.
    Answer Applies to: Nevada
    Replied: 10/16/2014
    Thomas Vogele & Associates, APC | Thomas A. Vogele
    The first question is why one would file bankruptcy to shed $13,000 in unsecured debt? Bankruptcy is a serious step and requires consideration of all ramifications that flow from it. Buying a home and titling it as you propose is also puzzling. If you intend to "own" the home with your husband but only he is on the loan, why not put it in his name alone and avoid having your interest in it exposed to bankruptcy? You need a competent lawyer before you do anything with a bankruptcy or buying a home. You are setting yourself up for potential disaster, all because you can't scrape together $2,000? The long-term effect of what you are proposing is hundreds of time worse. Here is what I would do immediately: 1. Contact the bankruptcy court in your district and see if they have a pro bono bankruptcy clinic. If they do, schedule an appointment and tell them everything about your situation. 2. Contact your creditors and explain that you can't pay what they're owed but you could work out a reasonable payment plan to pay them a percentage (50%) over the next 3 years. Be honest and don't be intimidated. If they say no, what's the big deal? You're no worse off than you are now. 3. Try to refinance your student loans to reduce the rate. Rates have never been lower so lock in now. 4. Title the home in your husband's name and plan to change vesting once you've cleared up your credit in 3-5 years to joint tenancy. 5. Create a budget and stick to it. Don't make excuses for overspending and don't take on any more debt until you're on solid financial ground - and then you won't need it. There is no quick fix for credit problems. Bankruptcy should be a last resort and something you do after considering every other option. Whatever you do, don't ignore your credit problems or think you know what to do. Ask for help. It's out there. Good luck.
    Answer Applies to: California
    Replied: 10/16/2014
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