Bankruptcy and Real Property?

Question

I own a home that is currently rented out but I'm close to defaulting on the loan. I also own property in another state with another party. If I was to go into foreclosure for the home in california. What will bankrupcty courts make me do with the co-owned property i have? Considering my partner doesnt want to sell or will a sell be forced?

Answer 1

Yes it will, you're required to disclose everything.  Perhaps the bank will buy half?

Answer 2

When you file bankruptcy, everything you own becomes property of the bankruptcy estate.  You can exempt most of it, which is how you're able to keep it.  In a Chapter 7, any non-exempt property belongs to the Chapter 7 Trustee.  The Trustee's job is to sell non-exempt property and make a pro-rata distribution to your unsecured creditors.  If there is equity in the house you own jointly, the Trustee will contact the co-owner and offer to sell the estate's interest to the co-owner.  If the co-owner refuses, the Trustee will file a lawsuit in bankruptcy court to sell the property and pay half of the proceeds to the co-owner - see section 363 of the bankruptcy code.

If there is no equity in the house, the Trustee won't care about it and it won't matter.

If you file Chapter 13, you also won't have to worry about it, because Chapter 13 Trustees do not liquidate property, but manage payment of claims.  You will have to include the property's mortgage payment as part of your Chapter 13 plan payment.

In short, there are a number of factors, and you should consult with an attorney.