Learn me: Bankruptcy

   For... reasons... it looks like I'm going to have to file for bankruptcy. There are several issues but, my main concern is the cars I have purchased for my children are in my name. Apparently, in Illinois a car can't be titled in the name of a minor. I'm speaking with an attorney tomorrow morning and seeing what my options are but, I'm hoping someone here might have some insight. I owe about 20k on my house and, despite the verbiage in the divorce decree and me filing a quit-claim, I have been unable to get my name removed from my ex's mortgage which, as of the 15th, is now in foreclosure.

I have no other outstanding debts I just want to make sure, since they're in my name, I'm not forced by law to sell my kids' cars. I paid cash for them.

Thanks in advance.

All I can offer is this:

Gov link

The short version is search for "reaffirm" in the link to see if that is helpful, especially with your house. 

My ex wife declared bankruptcy in college.  No idea if that's a similar process today, but she had to attend a hearing where the creditors were invited.  According to her attorney, some creditors always show up, others never.  They will argue that you still owe them their money.  In my wife's case, Sears showed up and one other.  It was pretty slam dunk that she still owed them, but the rest got wiped.

For nearly all of our marriage, everything had to be in my name, because if she tried to get credit it was always a hard no.  Here is something they won't tell you.  They always say "stays on your record for 10 years," but that isn't entirely true.  It stays on your record really forever, it's just that after 10 years, creditors are not "supposed" to base their yes or no on your bankruptcy.  They can still look at your records and deny you for some other reason to make it look kosher.  My ex is still having trouble with it even though hers was 25 years ago.  When we divorced she wanted to keep the house, but 7 lenders wouldn't even consider her.  Her parents had to get a home equity loan to lend her so she could buy me out.

That's not entirely because of the bankruptcy.  She also lost the ability to claim my income as part of the household, so her income more or less was half of what it was before.

I'm mostly saying that you should be absolutely sure you want to do this.  It makes some things easier, but the fallout can be pretty intense and longer than you expect.

If it's just the house going into foreclosure it seems it wouldn't need to lead to bankruptcy.  See if the lender will do a hand over the keys foreclosure.  They get the house and don't have to pay for all the legal fees.  That said I think a foreclosure on your record would be way better than a foreclosure and a bankruptcy.  

From what I understand:

- The house is your ex
- You are also on the house's note
- There outstanding balance on the note is $20k
- Your ex stopped paying the mortgage and it will affect your credit. 

1. Assuming the house is worth more than $20k, can you pay off the house, sell and get your money back? You would have to have something in writing from your wife, obviously. 

2. Can you sell your kids cars to a family member for a reduce price and then buy back?

I would try hard as possible to not file bankruptcy. 

Why are you having to file bankruptcy for her bs?

Personally, letting the home fall into foreclosure is much easier to recover from than the bankruptcy.

Are you paying her bills too?

In reply to Slippery :

I owe 20k on my house (it's a shack, I paid 30k for it), hers is around 110-120k and is currently 9k behind. The divorce pretty much set me back to zero on everything so I can't pay it off. I have the kids so I can't pay for two houses.

In reply to Ranger50 :

No, I'm  not paying her bills.

Whats the worst that happens if they just foreclose on her place?  Other than losing the equity which I assume you have none of anyway if its "her house"

That all being said if what you said is 100% accurate, probably need to lawyer up vs just taking it on the chin.  

The_Jed said:

In reply to Slippery :

I owe 20k on my house (it's a shack, I paid 30k for it), hers is around 110-120k and is currently 9k behind. The divorce pretty much set me back to zero on everything so I can't pay it off. I have the kids so I can't pay for two houses.

Is her house worth $110K-$120K? Or that is the remaining balance on the mortgage? If the former, what is left on the mortgage? If the latter, what is the house worth?

Bankruptcy stays on your credit report for ten years, foreclosure for seven. For that reason alone it might make sense to have the bank take the house. I'm not familiar with all the ins and outs though. What happens if she strings it along and doesn't get foreclosed for a few years, will you get harassed by collectors or is it easy to get them off your back I don't know. They can't take your residence. I don't know about the cars but in foreclosure I would think that they for sure can't touch them. Bankruptcy I'm sure they'd want a list of assets there's no mechanism for that in a regular foreclosure that I know of. Maybe it would pay to see a lawyer and get advice. But if you can meet all your obligations just not the note on her house I would think just letting it go would be easier than bankruptcy. All uninformed opinion of course. 

In reply to The_Jed :

If at all possible, get the house on the market ASAP. Also, get in contact with the lender, communication may buy you some time. A foreclosure takes 6 plus months from start to finish. There are a number of warning letters and actions that have to be completed before the actual foreclosure. If you can gain a month or two, that may be enough to sell it. Go for a short sale if the value of the house will not cover the mortgage. It might be in your best interest to pay the mortgage payment until the house sells. Even a partial payment may buy you time. 
 

This happens all the time in divorces. Yep, "quit claim" does not take you off the mortgage, only the title. It gave up the right to equity not the responsibility for the debt. Assuming that there were lawyers involved, any divorce lawyer that doesn't force the sale or refinance of the house as part of the divorce decree in a very specific time period is a hack. If it's in the divorce decree, a judge can force her to sell the house Unfortunately, divorce is a slam dunk in the legal system so there are lots of hacks in that space. 
 

I am not a lawyer, but my mom was a court clerk. I have heard all of the horror stories with this stuff that you can possibly imagine. 

dyintorace said:

The_Jed said:

In reply to Slippery :

I owe 20k on my house (it's a shack, I paid 30k for it), hers is around 110-120k and is currently 9k behind. The divorce pretty much set me back to zero on everything so I can't pay it off. I have the kids so I can't pay for two houses.

Is her house worth $110K-$120K? Or that is the remaining balance on the mortgage? If the former, what is left on the mortgage? If the latter, what is the house worth?

The remaining principle balance is 109k so, I assume the total payoff would be 110-120. We bought it in '16 for 135, iirc but, as far as I know it hasn't been appraised since. I have no idea what it's worth. The Zillow Zestimate is 179,400, if that means anything at all.

Is her name on your 30K house/mortgage? If not, why does the 20k need to be paid off right now? I can't imagine filing for bankruptcy over owing 20k on a house. Is there any way to force sale of the 120k house? Even if you let your ex keep all the equity from it, it would still be better than having a foreclosure on your record. 

The_Jed said:

dyintorace said:

The_Jed said:

In reply to Slippery :

I owe 20k on my house (it's a shack, I paid 30k for it), hers is around 110-120k and is currently 9k behind. The divorce pretty much set me back to zero on everything so I can't pay it off. I have the kids so I can't pay for two houses.

Is her house worth $110K-$120K? Or that is the remaining balance on the mortgage? If the former, what is left on the mortgage? If the latter, what is the house worth?

The remaining principle balance is 109k so, I assume the total payoff would be 110-120. We bought it in '16 for 135, iirc but, as far as I know it hasn't been appraised since. I have no idea what it's worth. The Zillow Zestimate is 179,400, if that means anything at all.

If the house is worth ~175k, the mortgage principal is ~109k, then she should be able to just sell the house and avoid foreclosure. She'd get ~60k cash from the sale, and nobody would have a foreclosure or bankruptcy on their record.

The_Jed said:

In reply to Ranger50 :

No, I'm  not paying her bills.

It sure seems like it to me. 
 

If you and your attorney didn't force a literal 50/50 split of assets and debts, you got rolled over. Everything is negotiable. If anything, yall should have forced a sale on each home and split the money. On paper she has more debt but also much more in assets.....

There were no divorce lawyers. I bought my house after she decided to call it quits, she is not on it. She got the nice house and the camper (it's paid for) and I got the kids. No alimony or child support. 

Thanks for the advice about foreclosure vs bankruptcy, with my lack of debt (that is actually mine) it looks like it would be worth looking into.

Ranger50 said:

The_Jed said:

In reply to Ranger50 :

No, I'm  not paying her bills.

It sure seems like it to me. 
 

If you and your attorney didn't force a literal 50/50 split of assets and debts, you got rolled over. Everything is negotiable. If anything, yall should have forced a sale on each home and split the money. On paper she has more debt but also much more in assets.....

Why does it seem to you like I'm paying her bills?

In reply to The_Jed :

Because if you are looking at bankruptcy without a large debt load and she isn't.... There should have been language stating whose debts are whose. If there is, forward it on to joint accounts. If there isn't, sorry you're stuck paying her bills.

Oh lord.  Brother, would you wander in here and ask people about getting cancer surgery if you had a tumor?  This ain't any different.

I do this for a living.   Flurry of posts incoming.   TLDR; go talk to a lawyer who only does bankruptcy (email me if you want me to find you a referral) and don't ever, ever, ever mention the word "bankruptcy" amongst non-lawyers, because the amount of bad information people have about bankruptcy in specific and debt in general is staggering.

I'll be back after I have my coffee.

Like dculberson said, I would ABSOLUTELY talk to a tax attorney who specializes in stuff like this IMMEDIATELY. 

And like others have said, it sounds like the house is worth more than debt owed, she needs to just sell it. 

I have nothing constructive to add, other than this:

In school, they taught us a decent bit about the legal system. 

Mostly, though, they taught us to identify situations when it it's time to hire a lawyer--not how to be one ourselves, even if we'd gained a functional understanding of the legal system.

This feels like time to pay for at least a consultation with a lawyer. 

Who holds the mortgage?  Have you met with them, face to face?

You should have used a lawyer for the divorce then this would not be a thing.  Lawyer up, but please interview a couple with some standard questions and ask about rates.  Then pick the one you are most comfortable with.  They are not all bad, the right one will make this go away.

Curtis73 (Forum Supporter) said:

Here is something they won't tell you.  They always say "stays on your record for 10 years," but that isn't entirely true.  It stays on your record really forever, it's just that after 10 years, creditors are not "supposed" to base their yes or no on your bankruptcy.  They can still look at your records and deny you for some other reason to make it look kosher.  My ex is still having trouble with it even though hers was 25 years ago.  When we divorced she wanted to keep the house, but 7 lenders wouldn't even consider her.  Her parents had to get a home equity loan to lend her so she could buy me out.

 Curtis, this isn't true, based on the experiences of literally hundreds of my clients.  It is true that it has gotten easier to rebuild your credit after a bankruptcy - it used to be more of an issue. 

If you file for a standard chapter 7, you will nuke your credit scores but you will cut off the negative effects of all the past stuff on your credit report.  It's a wall that prevents bad stuff in the past from reaching into the future.  The analogy I use with clients is that you're climbing out of a hole, but you're climbing out with nothing on your back.

It is true that there will be a notation on your credit report for ten years that you filed for Chapter 7.    It will not affect your score for that entire ten year period.  The only lenders who care about that date are government backed mortgages (which is most of them) - you will not qualify for a Fannie/Freddie/USDA/FHA loan for 36 months after you file, no matter how high you get your score.

It is possible - and not entirely difficult- to rebuild your credit after a bankruptcy filing.  You get a secured credit card or you get a small car loan at a highway-robbery interest rate, and you make every payment on time. EVERY ONE.  You keep the balance low if it's a credit card, and you don't try to raise your limit or do anything else that will get you back in the debt cycle.