Second Home in a property settlement in Chapter 13

[wanuvas]

So I'll need to give a little background before I get to my question.

My ex-spouse and I have a property settlement from our divorce. In our decree it states we will continue to jointly own a home worth about 120-125K Current mortgage balance about 62K. At the time the mortgage is paid off I am to quit claim my interest in the property to them. Fine. Pretty simple. At the time of the filing my name is still on the deed as an owner and the mortgage as a borrower.

When I filed my CH 13 Bankruptcy I listed my ex spouse as a creditor along with Chase. THey were listed as unsecured creditors for the debt. My ex spouse was also listed on the schedule that creates the automatic stay for co-debtors. THe property was listed as part of the bankruptcy estate.

Chase subsequently filed a motion asking the trustee to abandon the property & remove the automatic stay so they could commence a foreclosure action against the property and my ex-spouse as a co-signer.

The spouse did not file a proof of claim nor attend the 341 hearing to object to my plan. The plan has a 0% payback to unsecured creditors and the trustee did not object at the hearing (Whew!) Assuming my plan is confirmed and the trustee agrees with Chase's motion here's the question.

My ex spouses attorney contacted me and asked if I would be willing to quit claim the equity I have in the property once the plan is confirmed so my ex can refi the loan and get my name off of it. (Something I have been asking for them to do for 4 years and offered to pay for but hey why do that when someone is making half your house payment...) i.e. completing the terms of the decree that now I'm shielded from having to do anyway because of the ch 13 filing and how it deals with property settlements. One thought I have is to agree to it if my ex makes a gift to my daughter for her college fund of 20-30% of the equity my ex would be gaining. Is that going to create problems with the trustee or the court if the plan has been confirmed since the trustee will have abandoned the interest in the property at that point? I don't believe I can simply have the payment come to me as that has to go back into the bankruptcy estate however if my daughter can get some benefit and it is legal to do so that is a thought.

Thoughts anyone? I realize this is complicated and my attorney is researching it now but I was wondering if the community has heard of anything like this.

[lrprn]

Divorce and bankruptcy often make very uneasy partners. A great deal typically depends on your state's divorce laws and any case law precedents set regarding this situation in other cases. How the local judge and trustee in your case interprets the situation can have an impact as well. It could get really messy.

About filing a quit-claim, since you are in an active Ch 13 bankruptcy, your trustee has to approve anything done with the house. I really doubt your trustee will be willing to walk away from your half a house and gain nothing for your creditors, especially with a 0% payback plan. Your lawyer is going to provide the best advice about whether a quit-claim is possible or not (doubtful).

A hard question to ask perhaps, but how do you feel about your spouse possibly losing the house to foreclosure if the court decides to go after your half of its value? This will likely make selling the house the only way to provide your trustee with your half of the home's value.

Sounds like your lawyer is investigating all the possibilities. I hope everything works out in your favor in the end. Keep us posted, ok? Good luck!

[wanuvas]

Great question.

I would say it's sad to me LRPRN but from where I sit my ch 13 was filed in part because it was the only way to discharge the property settlement obligation. And after several years of not being able to get my ex-spouse to act in a way that benefited them and myself then they get what they get. I tried to re-negotiate with them in good faith & they simply said "Talk to the hand."

From my perspective if the house is sold then the money goes to the trustee which is the same as me having to quit claim the equity over to my ex spouse i.e. I ultimately get nothing no matter what since I have a 0% plan.

That is why it is from a certain point of view an interesting question. IF the trustee agrees to Chase's motion to abandon their interest in the property, then technically I could argue that I recieved no benefit because the decree compels me to transfer the equity to my ex. However my ex will need my signature to complete any refi because they will DEFINATELY want me off the deed moving forward. So how much is my signature worth to my ex and can I use that leverage to benefit my child's long run interest. My attorney is still working on it but I have no interest in doing anything that messes up the Ch 13 at this point. I suspect the trustee will not agree to Chase's motion to begin with and then the judge will have to decide.