What Happens if Your Ex-spouse Files Bankruptcy and Is the Co-signer on Your Mortgage?

Breaking up is hard to do — mostly because disentangling the assets and financial ties you and your ex have together can be very difficult.

For one reason or another, that’s why you and your ex are still co-signers on a home’s mortgage. Now, your ex-spouse is filing for bankruptcy.

The Bank Doesn’t Care Who Pays the Money

Unfortunately, a creditor cares very little about your divorce agreement and your ex-spouse’s obligation to pay the mortgage (or their share of the mortgage) on your home.

Essentially, you’re on the hook for the whole mortgage if your ex doesn’t pay up. If you don’t pay, your credit will definitely be damaged — and you could lose your investment or home.

The Type of Bankruptcy May Make a Difference

If your ex filed for Chapter 13, which reorganizes their debts, the property is probably safe. The trustee will most likely include the mortgage obligation in your spouse’s payment plans, which have to be made every month for the next three to five years.

If your ex filed Chapter 7, you could have big problems on your hands. If your ex is merely the co-signer on your home’s mortgage and not a co-owner of the home itself, you will be dealing with the whole mortgage on your own — which is bad enough. If your ex is a co-owner, that property’s equity will be considered an asset. As such, it can be seized by the bankruptcy trustee to pay off your ex-spouse’s debts.

Whatever the situation, you need to protect your interests. Whether you’ve been divorced for a month or two years, you cannot handle this without some experienced guidance. Talk to an attorney about your options for disentangling your finances as soon as you can.

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