Expert: Mark J. Markus- California Bankruptcy Attorney - 9/7/2009

Question
QUESTION: Hello

My mother and I bought a property together a property together, we recently sold it and we are carrying a loan for around 80.000. "The people that bought the property still owe us 80.000 and they are making payments to us of around $1500 a month. The loan is due in around 4 years."
The property is located in Washington State
My stepfather is in the hospital and isn’t expected to live that long  

My mother may have to go bankrupt how will that effect the 80.000?

Thanks

Matt


ANSWER: The loan is an asset of your mother's bankruptcy estate.  Whether or not it can be protected depends on the exemption laws of whatever state is applicable to her case.  To see more on exemptions, please visit http://www.bklaw.com/exemptions.html.  The income from the loan must also be factored in to her budget analysis and means test analysis to determine eligibility to file.

http://www.bklaw.com/

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

QUESTION: what about my half of the loan?


Answer
That depends on what chapter of bankruptcy your mother files and, again, what exemptions are available to protect her interest in the asset.  If she files a chapter 7 case, and there is equity, the Trustee can sell the Note and pay you your half, but you might get into a battle over the amount it's being sold for, since the Trustee can sell it at a discount.  If she files a Chapter 13 case, the asset would have to be valued and she would have to pay out at least as much as the creditors would receive in a Chapter 7 case, but the Note would not have to be sold.