Bankruptcy: My Name is Still On My Ex-Spouse’s Home
If you file for bankruptcy your ex-spouse may be affected if you have a joint mortgage.
Your bankruptcy will remove you from your responsibility to pay that debt, however, it does not:
a) require your mortgage lender to take your name off of the mortgage;
b) take your name off of the deed/title.
When you file for bankruptcy, all of your non-exempt assets are assigned to your Trustee to be liquidated for the benefit of your unsecured creditors. If the home has no equity, the trustee can arrange with your ex-spouse or his/her lawyer to sign over the Trustee’s interest in the property by way of a Trustee’s deed. However, if there is equity in the home, the Trustee will be required to recover the equity on behalf of your unsecured creditors. The ex-spouse can negotiate a settlement with the Trustee to pay out the other spouse's equity in exchange for a Trustee's deed giving him or her full title to the property. If no agreement is reached, the Trustee can register against the title to the property until a settlement is in place.
To get your name off of the mortgage, your ex-spouse will have to qualify for the mortgage, in his or her own name, when the mortgage comes up for renewal. Whether or not they qualify is up to their financial institution. For our bankrupt clients, we advise against signing any mortgage renewal documents if they have given up their interest in the property. If you sign the renewal to help out your ex-spouse, you will be liable for the mortgage should your ex-spouse go into default.
Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth - it's your choice.