When deciding whether to file a Chapter 13 Bankruptcy together with your spouse, there is a new interesting factor to consider. In a recent case, the next thing happened. Judge Cristol denied a Chapter 13 Debtor the ability to strip a lien off of his home. Lien stripping is a great benefit of Chapter 13. It allows an underwater property owner to knock off a second mortgage, provided it does not have full security.
However, debtors will now have to take into account how their home is owned when considering lien stripping. In this case, the filing of Chapter 13 was individual or without the Debtor’s spouse. The entirety (TBE) of the Debtor and his wife owned the home as tenants. TBE means neither spouse owns the home individually, but each spouse owns the whole or entirety.
The Judge determined that individual debtors do not have permission to strip down or off a mortgage. That is unless the other spouse is also a joint debtor in the Chapter 13 case. Unfortunately, this is a burden of TBE ownership. When a property is owned TBE, any type of ownership change requires joint action by both spouses. On the upside, Chapter 13 allows a debtor to voluntarily dismiss their case at any time, unlike Chapter 7. So if you file Chapter 13 individually and you want to strip a lien, then you may voluntarily dismiss your case. And, you may refile with your spouse included.
If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.
