What Happens to Jointly Owned Property When You Seek Protection in Bankruptcy?

protection in bankruptcyYou have unmanageable debt and have concluded that the only way to move forward is file a personal bankruptcy petition. You may own property jointly with friends or other family members, including parents, children and others. Perhaps a family member co-signed for you or a parent added you to a bank account or deed as an estate planning tool. What’s the potential impact of a bankruptcy filing on jointly-held property?

The Basic Rule—Joint Liability for Jointly-Held Property

The bankruptcy rule is pretty straightforward—if you have any ownership interest in any property, it can be part of your bankruptcy estate, unless you can properly exempt it. The trustee in a Chapter 7 proceeding will have access to all property to which you claim any title, or have any “incidents of ownership.” That property may be sold to pay your creditors. If you’ve filed for protection under Chapter 13, any property that you own jointly with others will be part of the calculation to determine the amount you must pay each creditor over a three-to-five year period.

There is good news— the amount of the jointly held property available to the bankruptcy court will typically be only your individual interest. Absent documentation to the contrary, the court will typically view jointly-held property to be owned equally by all parties. If you share property with one other person, one-half of its value will be considered your individual interest. You may be able to provide the court with documentation showing that the funds were principally or entirely contributed by another person. However, the best solution is not to title assets jointly if you or the potential joint owners are facing financial challenges.

The other downside that may result from a bankruptcy involving joint property is that the bankruptcy filing may potentially appear on the credit record of any joint owner.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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