Expert: Mark J. Markus- California Bankruptcy Attorney - 10/5/2011

Question
Hi. Thank you for taking the time to read my question. My wife and I are experiencing severe financial difficulties at the moment and are considering filing for personal bankruptcy. About 3 years ago, my wife, while getting her elderly mother's affairs in order, had her and her sister's name added to the title to their mother's house through a Living Will.

If we file, how does this attachment to the mother's house affect our financial situation? Is the mother's home at risk in any way?

Thank you in advance for your help!

Answer
The answer depends on a number of different factors, not the least of which is how much equity there is in the house.  In short, if your wife is on title, then her interest in the property is part of her (and your) bankruptcy estate should you file.  If you file Chapter 7, then the value of her interest in the property will need to either be exempted (assuming you have exemptions available for that under applicable law), or the trustee can sell the property in its entirety.

(Exemptions are "protections" for value you have in certain assets such that they are "exempt" from collections.  Every state has different exemptions amounts available. Exemption laws are based on the state where you resided for the 2 years prior to filing your bankruptcy case or, if you lived in more than 1 state during that period, in the state where you resided for the greater part of the 180 days prior to that 2 year period).

If you file a Chapter 13 case, then the house is not at risk, but you would have to pay out through the plan at least as much as your creditors would get in a Chapter 7 case.  So, once again, the amount of equity and available exemptions are a key to answering your question.

Last, if your wife's mother can argue that your wife has only legal title to the property, but not equitable, then the value may be excluded.  Whether she has legal and/or equitable title is a matter of state law.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/
bankruptcy blog: http://bklaw.com/bankruptcy-blog/
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