Expert: Terry Leeders - 6/29/2008

Question
QUESTION: Hello! Due to some business troubles and medical bills, my husband and I have concluded that filing bankruptcy is our only option. In addition to our homesteaded property, the loan on my mother's home is in my name. She is on the deed only. We are not in default on this property, or our personal home. If I file, will/can a judgement be filed against my mother and will they be able to go after her personal assets in order to satisfy my/my husband's debt? Thank you for taking the time to answer this question. It is eating me up inside. Thanks again.

ANSWER: The lien will stay against mom's home, as it is a secured debt.  You will need to continue to pay the note if you wish to keep the property.  They won't file a judgment against any of you unless you go into a default and are sued.  You want to check that you are not on title to mom's home, sometimes they make the owner quitclaim it to both people (mom and you) if the non-owner is going to be responsible for the debt.  Assuming you are current, and there is no equity (or you aren't on the title) then there should be no problem as long as you make the payments.  Good luck.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your response. I should have been more clear...I am on the deed for the house as well. If I file will it effect her? If you could let me know on that I would appreciate it! Thank you again for your assistance. This is a wonderful service.

Thank you!

Answer
You need to have your lawyer perform an equity analysis to determine what equity there is in the home.  If there is no equity that the bankruptcy trustee can go after, then the home will be fine.
Normally, you take the value of the home, and subtract costs of sale (about 6% at least in the northern district of Illinois) then subtract the mortgage.  Then you would divide the remainder by the # of owners...two if it is just you and mom.  If you live in the home, you may qualify for a homestead exemption based on your state. (Illinois is $15,000) If the remaining equity is $0 or negative..the home won't be sold by the trustee in bankruptcy.   Hope that helps.