Can I File Bankruptcy If My Mother Owns My Home?
If you can't pay your bills, bankruptcy can help you eliminate your debt and start fresh. The fact that you live in a home owned by your mother won't prevent you from filing for bankruptcy, although the bankruptcy may affect her if you hold joint accounts together, or if you owe her back rent.
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Bankruptcy
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Bankruptcy is a legal process that shields debtors from collection efforts and discharges their debts. Depending on the type of bankruptcy you choose or qualify for, the court will discharge your debts after you undergo asset liquidation or after you complete a long-term repayment plan.
Joint Debts
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Your mother isn't responsible for paying your debts, nor can your creditors sue her for what you owe. If, however, you or your mother have joint debt (such as a joint credit card account), she is legally responsible for the entire debt.
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Chapter 7 Bankruptcy Liquidation
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In a Chapter 7 liquidation bankruptcy, your bankruptcy trustee liquidates your assets to repay your creditors and then the bankruptcy judge discharges (eliminates) the rest of your debt. Secured debts take priority, which means that if you owe your mother money or bank rent, she may not receive any repayment through your asset liquidation.
If the house is solely in your mother's name, the trustee cannot sell it to pay your debts. If, however, you are a co-owner of the house, it is possible that the house could have enough equity to require its forced sale. If this happens, your mother would have the right of first refusal to purchase your share of the home and would be able to claim her share of the proceeds from the liquidation sale.
Chapter 13 Budget
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Chapter 13 bankruptcy involves a repayment plan. A strict budget approved by the court is established requiring that you use any disposable income to repay your creditors during a period of three to five years. At the end of the repayment plan, the court discharges your remaining debt. In Chapter 13, you are not required to surrender any property for liquidation. If you do own part of the home you live in, Chapter 13 bankruptcy lets you and your mother keep the home. If you choose to file for Chapter 13 bankruptcy, any rent you pay to your mother will be included in your budget.
Warning
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If you do owe your mother money, don't hide this when you make your list of debts for bankruptcy court. While it is understandable that you would want to repay your mother in full, leaving debts off your bankruptcy case can cause the bankruptcy court to dismiss your case.
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