How Does Bankruptcy Affect Jointly Owned Property?


If you own joint property with another individual and want to file for bankruptcy, then you may be concerned about the way that the bankruptcy may affect the co-owner. This is a valid concern, since your joint property may be affected negatively. However, there are many factors that will determine whether or not your co-owned property will be seized. Keep reading to learn about a few of these factors.

The Type Of Bankruptcy

There are two types of bankruptcies that you can go through: Chapter 7 and Chapter 13 bankruptcy. When you file for Chapter 7 bankruptcy, a good portion of your property can be sold to pay creditors. However, some of your property is exempt from the sell off. These exemptions vary by state, but they typically include a home and certain personal property. For example, in New York state, your home may be exempt up to $165,550. So, if you co-own a home and the house is worth  $140,000, then it will be exempt. If it is worth more than the exemption amount, then it may be sold off. Some personal property is exempt as well, but the exemptions can only add up to a specific dollar value. In New York state, the value is $11,025.

When it comes to Chapter 13 bankruptcy, your assets are not used to pay off debts. However, your property is used to determine how much you will pay back to creditors during your bankruptcy. Also, if you want to keep certain property, like a home or a car, and these items are used as collateral to keep the loan in good standing, you will need to keep the loan current with timely and full payments on top of your bankruptcy repayment plan.

So, if your file for Chapter 13 bankruptcy, the co-owned property is unlikely to be affected. However, if you cannot continue paying on the loan because you cannot afford it in addition to the repayment plan, then it is best to make financial arrangements with the co-owner to take over the payments.

Where You Live 

Laws differ from state to state when it comes to joint property and how the property is assessed and used during a bankruptcy case. It is also important who the co-owner is. 

Certain states are called common law property states that consider each person a distinctive owner of the property. Each owner has a right to retain their share of that property. So if you own a house with another person, the other person has a 50% right to that property. Only the half that you own will be taken into consideration to determine if you are exempt from having the property used to pay off your creditors. 

If you live in one of the common property states, co-owned property laws are a bit more confusing. The court can rule that the property is owned by a single party or split 50% between two individuals. This depends on the name on the deed, loan, or contract. Also, the acquisition of the property can determine ownership too. For example, if you purchased a car before you got married, then the vehicle may be considered your property even though you share it with your spouse.

If you are not married to the individual who you co-own the property with, and as long as there is a document describing the ownership of both parties, then there is a good chance that the property will be seen as jointly owned, regardless of the state you live in. In this situation, the property can be sold, but the co-owner will see half of the sale price. 

If you want to know more about joint property ownership and how a bankruptcy may affect it, speak with a bankruptcy lawyer


20 February 2018

Working Closely With Your Attorney

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