A cautionary tale for those who want to file their own
I always say, you can do your own plumbing, you can be your own electrician, you have that right.
Folks want to save money. Especially, if you are bankruptcy, you do not have money laying around for attorney fees.
One Do It Your Selfer
Let’s call him Joe.
Too much debt, he has a house, but co-owns it with is fiance, who is a Canadian citizen.
But they live together in it. Got a $40,000 mortgage to buy it, from an individual, not a bank.
Then she put another $40,000 into it.
For some reason, that is when he decided to file his Chapter 7 bankruptcy.
He did not know the documents he would have to give the Chapter 7 bankruptcy trustee.
Like, a recorded copy of his mortgage.
Ooops. It was not recorded. The individual mortgagee goofed.
Problem is, theChapter 7 bankruptcy trustee’s rights are superior to that unsecured mortgage. He can sell that house free and clear, subject to the fiance’s half interest, and the debtor’s exemption.
Can the Chapter 7 Bankruptcy Trustee Sell My House?
Uh, yes! Their duty is to reduce non-exempt assets to cash for the benefit of creditors. This trustee could sell this house, even over the objection of the co-owner fiance.
The Trustee wanted $35,000 for the bankruptcy estate’s interest in the house.
This debtor was able to keep the house.
The fiance went back to the individual mortgagee who lent the first $40,000. As she, the fiance, did not file bankruptcy, she was still on the hook for that $40,000. Plus, she was out the other $40,000 she put in to fix up the place.
And now, they borrowed the $35,000 to pay the trustee, and gave another mortgage to that same investor.
They kept the house, and “saved” money by not hiring an attorney.
But, not exactly a happy ending.
You don’t know what you don’t know.
Sure, you can get all the bankruptcy forms online, but, one little mistake, and, there goes your house.
To cap it off, that mortgagee investor missed the deadline to file a claim, so all of the $35,000 paid to the trustee went to other creditors, none of it towards the first mortgage.
You can contact me, for free, with your bankruptcy questions.