Can You File for Bankruptcy on a House that Your Ex Got in the Divorce? - Westgate Law

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Can You File for Bankruptcy on a House that Your Ex Got in the Divorce?

Sometimes the FINAL divorce decree isn’t quite as final as we would have liked. In many instances, what seems cut and dry at the time of the divorce isn’t as simple as you thought. For instance, your ex may get the house in the divorce, but if it isn’t specified that they remove your name from the mortgage, any late payments in their future will negatively affect your credit report. This could leave you hoping that you can clear the entire mess up by filing for bankruptcy and listing the house in your bankruptcy (even though, according to the final divorce decree…it isn’t yours!)

Wanting to be done with your ex and with the past is just natural. And if life were simple, this approach would be, too. Sadly, in many cases, life just isn’t simple!

If you are eligible to file for Chapter 7 bankruptcy, you could eliminate your liability on the mortgage (for the house your ex was awarded in the divorce). But this would not remove your name from the property title or mortgage loan. In order for this to occur, your ex would need to refinance the mortgage to remove your name from the loan. If your ex has had trouble with the payments and you’ve seen negative ramifications on your credit report, they’ve seen the same negative effects on their credit report as well. This means they would have difficulty obtaining a lender to refinance.

Issues that You Need to Consider Before Making Your Final Decision on Whether to File or Not:

  1. Are you eligible to file for Chapter 7 bankruptcy? When remarried, you not only need to be eligible on an individual basis, but as a couple. If your new spouse has separate assets, they don’t necessarily need to be included in the bankruptcy, but income and any post-marriage assets must be included in the bankruptcy case filing.
  2. Do you have joint accounts with your new spouse? Filing for bankruptcy will have an impact on any joint credit card accounts you have with your new spouse. Your spouse can keep making payments and their credit shouldn’t technically be harmed, but the lender could have a notation included in their credit report saying, “Included in bankruptcy.”
  3. All debt is included in bankruptcy. You cannot file for bankruptcy on a portion of your debt. You have to include all of your accounts (credit cards, personal loans, etc.) Even accounts that have balances will likely be closed. Post-bankruptcy you start over rebuilding your credit, but not with the accounts you had pre-bankruptcy.

Filing bankruptcy will mean that the mortgage lender will be notified and future late payments your ex makes will no longer report to the credit bureaus, BUT if there is a foreclosure in your ex’s future, in the months after bankruptcy or years later, it will show up on your credit report. This would still impact your credit. Filing bankruptcy will means a notation on your credit for 10 years, but with dedicated efforts to rebuild your credit post-bankruptcy, you can start rebuilding your credit within a couple years.

If you need to discuss your options, call the southern California bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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