Mortgage taken out by Parents
My daughter is going into bankruptcy. I took out a mortgage, about 5 years ago, on my house to help her out. The Funds were given to her. We have an agreement that she would pay the monthly payments. She has now filed for bankruptcy.
What will happen to this mortgage? Are my wife and I responsible for this mortgage and the payments? The agreement was made at home, on plain paper, and not through any legal form.
Posted from: British Columbia
If I am reading this right, you now have a mortgage that is in your name that was being paid by your daughter as you lent her the money 5 years ago.
If this is the case, you are an unsecured creditor. Meaning your rights to collect this debt have been stayed by the filing of the bankruptcy. Now while in bankruptcy your daughter is not legally allowed to make any payments toward this or any other of her unsecured creditors. If she does she will be committing a fraudulent preference. Meaning that she has given one creditor treatement that another creditor of the same legal class was not provided.
So the net effect on you is this, she cannot make payments on this mortgage, you cannot accept payments on the mortgage. As the mortgage is in your name and on your property you will have to make arrangements to pay this mortgage as you originally contracted with the bank.