Expert: Terry Leeders - 7/27/2007

Question
My husband and I are considering filing Chapter 7 in Michigan due to $30,000 of unsecured credit card debt.  We bought our house in October 2006 for $155,000 and it
appraised for $160,000 at this time.  We have an interest only loan, so we have not paid down the principal at all and still owe $155,000.  When we bought our house, my mortgage banker recommended that I be added to my mother's checking account so that we could show that we had three months reserves to make our house payments so that we could get a conventional loan.  My name is still on this account and my mother has $19,000 in the account.  Legally, this looks like it is my money, even though I nor my mother don't consider it my money.  

I have spoke with a lawyer who said that since we don't have any equity in our house my husband and I have $40,000 of exemptions between the two of us, and this money will be exempt and they can't take it.  I am so very nervous that if I do file bankruptcy they could take my mothers money.  Is this correct??

Answer
Sorry, I am in Illinois and do not know the michigan exemptions.  There is no equity left after costs of sale for the home, so it wouldn't be affected.  You need to seek out local counsel regarding personal property exemptions for cash and money in the bank as you described.