stillpunky

Partner's ex's bankruptcy

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Hey there.

My partner's ex filed for bankruptcy...we are unsure what kind. They still have a mutual debt. They own a house together. Neither live in it and it is underwater, but they have had renters in there for 6 years and are getting the current payment from them. My partner takes care of paying the house payment for this each month with an additional 350 out of his pocket.

There is a second mortgage on the house which the ex is responsible for according to their divorce decree, although their names are both on it, he is listed as the second.

She has declared bankruptcy, as I said, and he has only become aware of it now, although she said she was going to do it before...I really think he was made fully aware only after she filed and it was becoming final. She told him that she left the house loans out of the bankruptcy.

He got a notice from the bank where their first mortgage is today saying that the debt has been discharged. He didn't WANT this debt discharged. how can she discharge a mutual debt, when they are divorced, without his knowledge?

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He got a notice from the bank where their first mortgage is today saying that the debt has been discharged. He didn't WANT this debt discharged.

xheadscratchx

A debt that was owed and then notice from the bank it is legally discharged and your friend is mad?

I've gotta hear this?

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I think the issue is that the debt is going to show as discharged on his/her report even though his/her ex filed the BK and they did not. What I want to know though is why was your partner not listed as a creditor on the BK when they obviously are a creditor based on the divorce decree. Since that is the law that the banks use to keep both spouses on the hook for debts, then that means that the partner was a creditor.

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First thing to do is go to PACER and download the entire BK so you know what was filed and when.

Secondly, the house can not be left out of the BK. All assets, liabilities and income have to be declared - otherwise it is fraud.

Third, even if the ex has been discharged of the debt, that doesn't mean that he is discharged of that debt. It means that he is personally repsonsible for it and she is not since she is the one with the BK discharge.

All this is moot without first reviewing the actual case. Get the case from PACER and go from there so you have accurate info to see what is actually happening.

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First of all, thank you very much for your replies.

I went to Pacer and registered an account, but it is going to take an hour for my login to be validated. I am not quite sure how to use it, it looks fairly confusing, but it probably looks worse than it is. We do not know anything at all about her case...when she filed...what she filed, etc. Nada. So I hope I don't have to search through seas of entries and rack up tons of charges doing so.

The reason he is upset is because #1...he didn't know about it. He has renters in that house that he is obligated to. Nice people. Not to mention that he isn't looking to declare bankruptcy or have his credit ruined due to his ex's bad decisions. There are many, among them buying a plot of land in Hawaii and charging it on a credit card.

Although the house is underwater, it is worth it to keep paying the mortgage on it so his credit isn't destroyed. It is currently well kept and rented and he cares for it and pays for it solely. The reason it is still in both of their names is because she refused to settle on it during their divorce. She kept trying to be bought out for more and more. It became completely ridiculous the amount that she wanted, so they agreed to both keep it because a decision couldn't be reached. In the mean time, it slipped to be worth less than half what is owed.

She also told him, yesterday, that he cannot ever refinance the home going forward, because if he does, it opens the doors for the bank to seize or lien against other properties (our house) that he owns. How can it be legal for him to have had no notification of this at all? They were separated for six years, then divorced. They have been divorced for 4 years.

Through the whole divorce and everything, he has maintained stellar credit, paid off all the mutual debts that were his responsibility and lived frugally...never missing a payment on anything and always paying his support for his two teenagers on time. The kids are here every Friday, Saturday and Sunday. I just don't understand how it can be legal for him to have received no notification and that now his credit can be ruined when he never even was notified.

If he keeps making the payments on the house (which he intends to) is his credit still screwed?

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Ask the EX what the case number is and you can search the BK section of PACER for the case. Make sure you are in the BK section...it can be a little confusing the first time you use it.

You are in CA so you want to make sure you are looking in the right district too (eg Southern District, Northern District etc).

If she won't divulge the case number, there is a name search you can use in PACER too. Be careful of the dates especially if she has a common name.

As to ruining his credit: the tradeline is supposed to be marked iib and zero balance for the filer only - not the co-borrower. He is the co-borrower so the iib on his CR should be disputed since he didn't file BK. This can be difficult to correct with the lender but its possible. LadyNRed has good info in the BK section of this site on correcting your credit report after filing BK. A lot of the info (caselaw) would apply to the person showing a BK on their report when they didn't file.

As to him not being able to refinance due to her BK...that is a bunch of baloney. Now if the house if upside down it is not practical to refi unless you have the funds to pay off the difference between the new refi amount and the current outstanding amount. What she "said" doesn't really make a lot of sense unless she is on the Deed. But I think we are getting ahead of ourselves here, read the case first.

And the prior poster is right - he should have been notified of her case right when she filed if he owns half the house and she ownes the other half.

Were they both on the mortgage or was the mortgage just in his name only?

From your original post it looks like they both are on the deed and they both have the first and second mortgage. It looks like they agreed he would be responsible to pay the first mortgage and she the second mortgage according to the divorce decree. The lender for the second can come after the co-borrower (him) if she has discharged her personal responsiblity to pay in her BK. In any event, both mortgages need to be kept current or either one can foreclose in the case of default. If she has discharged her liablity to pay, then it is up to your partner to continue to make payments. Still look up the case to see what was filed and what was discharged. If she has discharged her liability for the debt, then is she still expecting to collect on the asset in the case of a future sale. It is complex and something he needs to address, even after the BK is settled.

QUICK NOTE: A divorce decree does not over ride the signed note and mortgage. It only gives an avenue of recourse in accordance with the decree. The BK affects the personal liability of repayment for the discharged filer - not the co-borrower.

Edited by Denita

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Okay figured a lot more to this than just being upset because a bank had the debt discharged. I don't know a lot about BK, but best of luck. There are a lot here that do and I'm sure they will give great advice for follow up.

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Thank you all!!

Well, I just found everything on Pacer by querying her name. Thankfully, it isn't a common one. I ran off everything and it is in front of me.

From what I can tell, she filed a Chapter 7, originally on 7/8/11.

He is not listed as one of her creditors. A first meeting of creditors 341 notices (?) was held on 8/10/2011. There looks to be a copy of a letter here that was filed on 7/8 that looks like something that would be sent out to creditors and it says that if you are one, you will receive further notice of proceedings. Objections by creditors was due on 10/11 and since there was none the case was closed.

They are both jointly listed on the mortgages, they are both jointly listed on the deed to the property. The second mortgage is supposed to be her responsibility (per divorce decree), but he IS on the loan as co-borrower. She has kept paying the minimum balance on this, however...the discharge has been given to her on both of the mortgages. She COULD just stop paying and I realize this comes back to him.

I just don't understand how he could have gotten zero notification on this. She did tell him, last Christmas, she was thinking that she may have to declare bankruptcy. Then she told him that she did file, but all was in passing...for instance, he stopped by to pick up the kid's baseball glove and she would say "oh, and I think I AM going to go through with that bankruptcy, but it won't effect you. Its just for a medical bill". Regardless, how could we not have gotten anything in writing? Looking at these dates, things were already done by the time she even made these ambivalent statements.

ETA: I am thinking of having him do a quit claim and putting our house into my name only. Just to be safe and get anything that I have interest in as far away from her as I can.

Also, what kind of lawyer would one look for to try to straighten out the house ownership? My partner agrees that if she has been erased from obligation to pay that she shouldn't still have a stake in the house, underwater or not.

And as for refinance, he hasn't really considered doing this, since as you stated it really doesn't make too much sense, aside from the fact that he could lower the monthly payment. Still, to not be able to if he indeed have something arise is concerning.

You have been so helpful, thank you.

Edited by stillpunky

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Your partner needs to get the BK filing first. He should have been on the creditor matrix and notified because technically, his ex owes him for 1/2 the payments, not the bank. That would have made your partner a creditor in the case.

Once you get the filing, your partner may want to talk to a BK lawyer that is used to dealing with creditors rather than debtors to find out his options. I am thinking that the best option may be to try to convince his ex to either sign a quit claim deed or your partner has to do a quiet title proceeding due to the failure to follow the divorce decree. She might still owe him money because she did not include him on the BK properly.

I think this is beyond the scope of what help us amateurs can give here.

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WhoCares is right....it has to have been a big case for a Ch 11.

Get an attorney involved. Don't transfer anything right now.

oops, sorry, I see you said Ch 7 (not 11). In any event, have your partner speak to an attorney (BK attorney)

Edited by Denita

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Yes, I keep editing my post. Sorry. I shouldn't have such bad message board etiquette since I run one myself. I am just sort of panicked and devastated that our future plans could be so adversely affected due to this.

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This can be handled. Don't jump to conclusions. It really sounds like she and your partner are operating with partial or mis-information. That is why its best to get with a good BK attorney so he can figure out his moves since she failed to list him as a creditor in the BK filing. He needs to know what he can do legally and practically.

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This can be handled. Don't jump to conclusions. It really sounds like she and your partner are operating with partial or mis-information. That is why its best to get with a good BK attorney so he can figure out his moves since she failed to list him as a creditor in the BK filing. He needs to know what he can do legally and practically.

Thanks so much. I've located a local attorney who specializes in bankruptcy and real estate and am going to set up an appointment for an initial consultation.:D

The information that you guys provided has made me feel worlds better. You did your good deeds for today!

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The trustee in bankruptcy of your ex can communicate with you about the details of the property valuation, the time he lived there, etc. Your job is to try to demonstrate / document that you have made all mortgage payments and have most of any ownership interest, or in its entirety if possible.

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Since she did list the property in the BK and no creditors showed for the meeting, that appears to indicate they had no interest in the property in the context of a BK discharge. Being underwater, and the banks having a lien, there's nothing from it that can be distributed in BK, anyway.

There appears to be nothing in the BK itself that needs to be changed. Technically, he should have been listed. By not being listed, he could still bill/sue her for any provable losses, so this might actually be a good thing.

What needs to be addressed (by his new BK/RE attorney) is ownership of the house and status of the mortgage. The banks may be operating erroneously thinking the mortgage is entirely discharged, rather than one signer being discharged off the mortgage.

The bank's position may now be that they own her SHARE of the house and he still owes the ENTIRE mortgage (because that's the terms of the loan). That there are two banks can complicate this. Because it is underwater, this does put him in a stronger position to negotiate, but it does not assure the banks will play along. Threatening the two banks with an interpleader might soften their stance a bit since that's another trip to federal court to protect their rights.

And he's still got the fact that any debts she owes him (especially for failure to follow the decree) have not been discharged (and short of re-opening the BK which really makes a big mess for her since it implies she filed it wrong) she cannot do BK again for a while, so he could wait until she has new assets before suing (as long as he doesn't wait past SOL, which hopefully is now tolled to the date of BK discharge or even the date he became aware of the actual filing and discharge).

Overall, I'd say he's in a relatively good position, but has to deal with complicated issues to protect his rights (and needs to do so now, so it is good he has the BK/RE attorney lined up). Even so, he needs to be sure he brings everything to the table with the new attorney, and be sure everything is followed through with.

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Since she did list the property in the BK and no creditors showed for the meeting, that appears to indicate they had no interest in the property in the context of a BK discharge.

Of course not. They aren't going to waste resources responding to a BK when another person is still on the hook for the full balance of the mortgage.

Unfortunately, the real issue here is that bankruptcy being a federal case overrides any decision by a county or state court on a divorce proceeding. Although she should have listed him as a creditor under the divorce decree, it doesn't really matter since she got a no-asset discharge anyways. Bringing it up to the bankruptcy court would not change the outcome so the court won't even review it.

Also, the bankruptcy precludes any sort of civil action for failing to make payments on the mortgage under the divorce decree. He would be in violation of the injuction if he tried.

At this point all you can do is get her name off the deed if she stops making payments so she has no further rights to the property once payments cease.

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