Benefit to filing?

October 24th, 2011 by Questions

I am recently separated and my ex-spouse has left me in a shockingly disastrous financial situation. We currently both own the family home, which is valued at $250,000, and we have about $160,000 equity in it. Through the separation agreement, I ‘inherited’ a $50,000 line of credit.
My ex-spouse has 2 lines of credit in addition to mine, one for $52,000 which is an equity line against the house, and one for $50,000 which is a personal line of credit. Although he is supposed to be responsible for both of those lines of credit, he has defaulted on both and the bank is now threatening legal action. Unfortunately, I am the co-signer on both, although I have an amendment to the separation agreement that indemnifies me from the second one – not sure if this is binding in a bankruptcy situation?
I know nothing about personal bankruptcy, but if I file, does the bank come in and take all the equity out of the home, to pay off not only ‘my’ $50,000 LOC but both of his (ours) as well? Do they take the home? I have a vehicle which I own outright, valued at $10,000 – do they take that?

And so then am I left with a $250,000 house that I have no equity in and am forced to sell, leaving me with no collateral whatsoever for a new home and a broken credit rating?

What would the benefit to declaring personal bankruptcy be to me?

Thank you so much.

Posted from: New Brunswick


One Response to “Benefit to filing?”

, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

You have covered a lot in this post, far more than I can answer via this format. So what I would recommend is that you contact a local trustee to discuss these things in more detail.

But to give you an idea of what happens in a bankruptcy, your house. Ultimately, in New Brunswick there is not equity that one is permitted to have in a property, so if you file for bankruptcy you will find that the house is sold as part of the bankruptcy and any creditors attached to this house will be paid from the proceeds of the sale (so this would include your ex’s secured line of credit). This indemnity really doesn’t change this as when the document was signed they were given the right to the house as collateral, and nothing in the divorce can change the rights of the creditors to payment.

In terms of the benefit, if your debts are less than the amount of your share of the equity, then a bankruptcy wouldn’t be able to help in your situation as there is no benefit of a bankruptcy. What you would have to do if that is the case is either refinance the property, or sell it and pay off your debts.

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