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Will my father's home, used as collateral for my business loan (closed 2004), be lost if I declare bankruptcy?

Syosset, NY |

I've been paying $300mo against an initial $112k @ 8.5%. Turns out they applied the $300 against the interest and added $1250mo to the loan amt! now they say I owe $198k!!! Will bankruptcy clear this loan or will my father loose his home? The end date of the 5 yr loan was April/2010 and they have still been accepting the $300 each month.

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Attorney answers 3


Unfortunately, you can only use bankruptcy to discharge the loan if the property is surrendered. When filing bankruptcy, if someone wishes to keep property that is encumbered by a lien, they have to pay for the property. When it comes to real estate, this usually means continuing to pay on the loan, or finding a way to refinance it.

Please do not construe the preceding as legal advice. I am not licensed to practice in your state and provide my answer for informational purposes only. I encourage you to seek an attorney in your state. Good luck.


You may have options other than bankruptcy (i.e., loan modification). EVen in bankruptcy, the Eastern District of New York offers a loan mediation program. In addition, you may be able to do something if you file under Chapter 13, rather than Chapter 7. But you do have a serious problem that should be addressed right away.


If the loan was secured to your father's house the obligation will be paid from the sale of the house if and when it is ever sold.

Could the lender force the sale of the house? Maybe; depends on how title is held.

Will the bankruptcy Court sell the house? Maybe if you are on the deed along with your father and there is sufficient equity in the house to make selling it cost effective.

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