Being an adult is hard sometimes. And one of those times occurs when there’s a shortage of money, relationships have ended, property has been divided (theoretically) and someone is filing bankruptcy. In some cases, it can seem like you’re being pressured from all sides to do something that you don’t even understand. One such situation is the quitclaim deed. If your ex is filing bankruptcy in an attempt to stop the home from going into foreclosure, the bank holding the note may be requesting that you sign a quitclaim deed. They might insist that it’s the only way they’ll be granting him a loan modification. You ex may insist it’s the only way to save the property so he can follow through on the court order to sell it and split the proceeds. You may feel like it’s the right thing to do since everyone’s telling you the same thing: just sign the paper! But it might not be what you think it is at all!
Before you sign a quitclaim deed at the request of the bank or your ex or anyone, look into it on your own behalf.
If the bank is requiring that you sign a quitclaim deed and you don’t sign it, they will probably foreclose.
If the bank forecloses, they will either collect from you on the debt actively or “forgive” the debt, which would result in debt forgiveness tax debt (unless there is an applicable exception that can be used).
Simply signing and filing the quitclaim deed will not release you of liability for the mortgage if you are a liable party.
This is a sticky situation. It’s best to consult with an experienced bankruptcy attorney to determine:
- Who is currently liable for the debt?
- Would a loan modification on the home benefit you in any way?
- Will the bank release you from the debt if the loan modification is granted? Would they permit him to be the sole signer and release you from the debt?
- Would the bank be willing to provide you with a signed document releasing you from liability in exchange for the quitclaim deed?
In most cases, the bank is not going to be jumping at the chance to release you from liability if you’re already on the hook, but it doesn’t hurt to make the request. It’s a simple negotiation at this point. If you need assistance determining if you are responding to your ex’s bankruptcy filing appropriately, please get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law.