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Hanging on to Your House in Chapter 7

Posted by attorney Ellen Carlson

Although equity in homes is scarce these days, thanks to the market crash, you may be able to keep the equity you DO have and leave your credit card and medical debt behind in a Chapter 7.

The primary key to accomplishing this result is to examine your and your spouse's credit reports CAREFULLY. They may reveal that you do not owe joint debt other than your mortgage obligation or, perhaps, an auto finance obligation. Over the past 10-15 years, the trend in credit cards is for husbands and wives to have separate accounts in his or her name alone. While a spouse may provide a spouse with a courtesy card on his or her credit account, that does not impose legal liability on the courtesy spouse and the obligation remains SOLELY that of the .originating spouse.

If there is no joint debt in a case, the trustee, who stands in the shoes of a 'judgment lien creditor,' will not be permitted to sell your home, pay you your exempt amount and distribute the balance to our creditors. This is because a husband and wife own a home with a special title, tenants by the entireties A judgment must be against both spouses for it to 'attach' to such property. A credit card must be a legal obligation of BOTH spouses for the trustee to be able to move against the house, even if it has thousands of dollars of equity.

The bottom line: bankruptcy is a complex and hyper-technical process in which many factors integrate to yield the fresh start that you need. Missing just one of those factors - or analyzing it incorrectly or incompletely - can cause you to lose valuable assets you might otherwise have been able to preserve. You owe it to yourself to secure competent, skilled representation to help you achieve the best outcome possible!

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