If we own the house jointly,three of us- Daughter, Mother and Father- in this case, what would the effect be in bankruptcy ? Father and Mother are retired (in their very late 70′s). The daughter is terminaaly ill with cancer and will-of course- never work again. The house is free of mortgage and any liens.
If the daughter enters Bankruptcy, what is the position of the house as it is jointly owned?
Today 02/12/2012
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If one of the co-owners goes bankrupt, the trustee would be required to realize on that person’s share of the value of the house.
For example, if the house is worth $120,000 and there is no mortgage, the bankrupt’s one-third share would be worth $40,000. The trustee would therefore either want the other two owners to buy out the bankrupt’s interest for $40,000 (perhaps by getting a mortgage on the property), or the house could be sold, and $40,000 of the proceeds could be given to the trustee.
The other factor to consider is whether or not the daughter requires bankruptcy protection from her creditors. Since she is not working, the creditors cannot garnishee her wages, so it may be that a bankruptcy is not necessary.
As this is a complicated area, we suggest you contact a trustee for a detailed review of your situation.