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What happens when your ex files bankruptcy and you co-own a home?

When you co-sign a home with someone, one of you will always remain on the hook for the debt if the other defaults. This is true regardless of your relationship with the person. That means if you and your former spouse co-own a home together in Ohio, and he or she files for bankruptcy, you will likely have to bear the burden of the mortgage on your own if you hope to keep the home. That said, depending on the type of bankruptcy for which your former spouse filed, the situation may be a little more complex than that. SFGate explores your options for bankruptcy after divorce.

If your co-owned home is in Chapter 7, the bankruptcy will wipe out your ex's financial obligation for the mortgage on the property. However, because you did not file for bankruptcy, the lender can turn to you for repayment. If you do not meet your own and your ex's former payment requirements, the bank can foreclose on the home. If, for some reason, your former spouse still lives in the home and he or she filed for bankruptcy regardless, the lender can still look to you for payment of the loan.

Furthermore, if your shared home is in Chapter 7, and if your ex is on both the deed as a co-owner and on the mortgage, the lender may look to his or her share of the home for equity. If this is the case, your only saving grace would be if the value of your ex's share of the equity in the home is less than Ohio's homestead exemption.  

If your co-owned home is in Chapter 13, the situation is slightly different and the outlook much more promising. Under a Chapter 13, your ex is still responsible for remaining current with his or her regular monthly bills. Though the bankruptcy courts prioritize debts in a Chapter 13 case, because a house is such a huge asset, and because homeownership is often only possible via a large loan, a home loan is likely to top the list for repayment. Unless your spouse owns several significant assets, it is safe to assume that he or she must continue to contribute to your mortgage payment each month under a Chapter 13.

The information in this post is for educational purposes only. It should not be interpreted as legal advice.


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