Home equity in divorce when home is in bankruptcy

[Griffzan]

What is the name of your state? Michigan

I'm currently in the process of going through a divorce and most everything is settled with the exception of the marital home and the equity that may or may not be involved. I filed for bankruptcy approximately two years ago and the home fell through the cracks and was not reaffirmed and am currently paying on a month to month and not even getting a mortgage statement. In any event it's unknown by anyone involved in the case as to if the home has any "value" (including my lawyer or hers) Any insight or clarification in this matter would help a great deal

 

[zddoodah]

the home fell through the cracks and was not reaffirmed

You mean that you didn't reaffirm the mortgage.

Under what Chapter did you file BK? Did only you file or did you and your spouse file jointly? Have you received a discharge?

In any event it's unknown by anyone involved in the case as to if the home has any "value" (including my lawyer or hers) Any insight or clarification in this matter would help a great deal

Well...the answer to the question, as phrased, is obvious. I can't imagine any home in the United States that has no value. Of course, you put the word "value" in quotation marks, and I don't know what you meant by that.

Since no one here has reviewed how the home is titled or knows anything about the mortgage, and since no one here knows anything about your BK, no one here will be able to offer you any insight into the situation. If your lawyer can't figure it out (and isn't smart enough to know that a call to your bankruptcy lawyer might be in order), then you might want to consider looking for a better lawyer.

 

[Taxing Matters]

The details of your bankruptcy, including whether it was a Chapter 7 or a Chapter 13, whether you obtained a discharge in the bankruptcy, and whether there were any exceptions to the discharge are significant in figuring out where you stand. However, if I assume you filed a Chapter 7 and were granted general discharge at the conclusion of the bankruptcy, and that the home mortgage was not excluded from the discharge, then you would have no further personal liability on the debt. That would explain why you don't get any bills from the lender. However, the mortgage lien on the home would survive the bankruptcy. So the lender could still foreclose the lien if it wished, but since you've been making payments it doesn't really have any incentive to do that. When the house sells, though, the mortgage lien will need to be satisfied. The home certainly has value; the question is whether there is any equity there for you and your ex after the mortgage is taken care of. That obviously depends on the value of the home and what it would take to pay off the mortgage lien. If, as you post implies, the bankruptcy trustee abandoned the home as an asset that suggests that the value of the home at the time of the bankruptcy was not a whole lot more than the mortgage lien(s) plus the homestead exemption. So there might not be a lot of equity for the two of you to argue over in the divorce.

 

[quincy]

What is the name of your state? Michigan

I'm currently in the process of going through a divorce and most everything is settled with the exception of the marital home and the equity that may or may not be involved. I filed for bankruptcy approximately two years ago and the home fell through the cracks and was not reaffirmed and am currently paying on a month to month and not even getting a mortgage statement. In any event it's unknown by anyone involved in the case as to if the home has any "value" (including my lawyer or hers) Any insight or clarification in this matter would help a great deal

You could have the house appraised.

 

[adjusterjack]

In any event it's unknown by anyone involved in the case as to if the home has any "value"

There's a couple of easy ways you can get a ballpark figure as to the current market value vs the loan balance.

Since you have been making the payments every month, the loan balance should be amortizing just as it was in the past. Use the following calculator to make an amortization schedule based on the original amount financed and the interest rate.

Mortgage/Loan Calculator with Amortization Schedule (bretwhissel.net)

That will give you approximately the current balance.

Next, google the address of the home and several realtor sites will come up: Zillow, Redfin, realtor.com. Each will give you an approximate market value of the home. That will give you a price range. You can narrow it down further by looking at recent sales of comparable homes in your subdivision.

Or, as Quincy suggests, you can pay for an appraisal.

 

[stealth2]

Next, google the address of the home and several realtor sites will come up: Zillow, Redfin, realtor.com. Each will give you an approximate market value of the home.

Just as an FYI.... I did this just now with my home. The Redfin & realtor.com estimates were in line with what I anticipated. Zillow and Trulia were vastly inflated.

 

[Griffzan]

To add.. Yes, it was a chapter 7 and has since been discharged. The home was supposed to be reaffirmed but the case was heard by phone and although both my lawyer and I did say the home needed to be reaffirmed it wasn't and unfortunately did not find out until after the discharge. This bankruptcy was for me alone but the wife had one in the past and because of that had to sign off on the home in order for me to be approved for the loan. I put value in quotations because I do not know if I have equity in the home because of it's bankruptcy status. I did although check the zillow estimate on my home, which puts it right around 170,000. I purchased the home for 135,000 and currently owe just over 122,000.

 

[adjusterjack]

I did although check the zillow estimate on my home, which puts it right around 170,000. I purchased the home for 135,000 and currently owe just over 122,000.

The difference between the 122,000 and 170,000 for example is your equity, roughly 48,000 less realtor commission (6% of 170,000 is10,200), if you use one, and closing costs (maybe 2,000), if you sell it. Zillow tends to run a bit high. That the home is in just your name gives you some leverage because you won't have to rely on your wife's consent or signature to sell the home if you want to. You'll just have to give her half the proceeds. If you want to keep the house, you'll have to pay her what amounts to half the net proceeds that you would have gotten if you had sold it. You might have no choice but to sell if you can't come up with the cash for her half unless there's an offset you can offer, like maybe assuming an equivalent amount of her debt, or giving her the better car, any number of things can be negotiated.

Find out what your wife wants out of this. Understand that the longer you two continue to pay lawyers the less money you're going to have when it's all over.

 

[zddoodah]

The home was supposed to be reaffirmed but the case was heard by phone and although both my lawyer and I did say the home needed to be reaffirmed it wasn't and unfortunately did not find out until after the discharge.

You can reaffirm a mortgage, but you cannot reaffirm an asset. So, again, I assume what you meant to say was that it was your intent to reaffirm the mortgage, but that never happened. Right?

Also, not sure what you meant when you wrote that "the case was heard by phone." I assume you're referring to one or more court appearances, but it's not clear what that appearance or those appearances might have been for. Regardless, any bankruptcy attorney with even the slightest degree of competence knows what needs to be done for a debtor-client to reaffirm a mortgage, so it seems your lawyer dropped the ball here.

This bankruptcy was for me alone but the wife had one in the past and because of that had to sign off on the home

So...your wife is not on the title to the home? If that's the case, why do you think she'd be entitled to any equity in your divorce?

I suspect "Taxing Matters's" explanation of the status of the home and mortgage is correct, and it sounds like the home may have $45-50k in equity. However, you need to discuss with your divorce attorney why, if your wife "sign[ed] off on the home," she would have any entitlement to any equity.

Understand that the longer you two continue to pay lawyers the less money you're going to have when it's all over.

Yup.

 

[Ohiogal]

You can reaffirm a mortgage, but you cannot reaffirm an asset. So, again, I assume what you meant to say was that it was your intent to reaffirm the mortgage, but that never happened. Right?

Also, not sure what you meant when you wrote that "the case was heard by phone." I assume you're referring to one or more court appearances, but it's not clear what that appearance or those appearances might have been for. Regardless, any bankruptcy attorney with even the slightest degree of competence knows what needs to be done for a debtor-client to reaffirm a mortgage, so it seems your lawyer dropped the ball here.



So...your wife is not on the title to the home? If that's the case, why do you think she'd be entitled to any equity in your divorce?

I suspect "Taxing Matters's" explanation of the status of the home and mortgage is correct, and it sounds like the home may have $45-50k in equity. However, you need to discuss with your divorce attorney why, if your wife "sign[ed] off on the home," she would have any entitlement to any equity.



Yup.

Any equity that accrued during the marriage is marital property.

 

[adjusterjack]

However, you need to discuss with your divorce attorney why, if your wife "sign[ed] off on the home," she would have any entitlement to any equity.

My guess is that the wife disclaimed "ownership" so that Griffzan could qualify for the loan. That's rather common when the non-borrowing spouse has poor credit. That has nothing to do with the marital interest in the property that accrued during the marriage. Marital property gets divided "equitably" in Michigan.

 

[Taxing Matters]

If a person cannot pay off his or her debts, he or she may file for bankruptcy. In this case, the courts will take over the debt and give the debtor money to pay back the creditors. However, if the debtor does not have enough money to pay back the debts, he or she will lose some of his or her property. This includes any real estate owned by him or her.

This thread is over six months old and the person who started it is unlikely to come back to see your response now. For that reason, posts to old threads are discouraged here.

Your description of the bankruptcy process in the U.S. is wrong. For a lot of good information on bankruptcy in the US see the US Courts page on Bankruptcy Basics. The links there for Chapter 7 and Chapter 13 bankruptcies are the parts that cover most individual (i.e. non business) bankruptcies.