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Can creditors force sale on second house owned by 4 siblings with very low equity ($20K each), when one is filing Ch. 7 BK?

Asked over 2 years ago - Chicago, IL

Bankruptcy Chapter 7 Bankruptcy Filing for Bankruptcy

My brother is forced to file chapter 7. His is also facing foreclosure on his primary home. He also owns second home with us, which is occupied by our parents. He is worried that he doesn't have enough exemptions to cover the second house, and creditors will try to either sell his interest in the property to someone else or force a sale for the whole house. We bought the house for 240k, and it's worth only 200k now (as of 10/09), we have 125k loan on it, so the equity would be around 18k each. Would it be in the creditors best interest to try to sell the house? We are so concerned, we need some answers. His lawyer wants them to leave their house since it's being foreclosed on and move into the second house to protect it, is it necessary to do this? Please help,

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Attorney answers (1)

Henry Repay

Reputation Level 15

Answered over 2 years ago. Bankruptcy Attorney in Belvidere, IL.

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Since the equity cannot be claimed by any of the owners as homestead, it is likely the home would be sold to get your brother's share of the value. The attorney is advising him to move into the property so that he can try to claim a homestead exemption, but some care in making moves like this while contemplating bankruptcy. The alternative would be for the family to consider a fair buyout of your brother's interest, by one or more of you. Your brother would then have cash which he would either have to account for in his bankruptcy or live off of in an attempt to avoid bankruptcy. The family should be advised in this matter.

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