I just found out that a loved one put me on the deed to their house – can I still file bankruptcy?
In the past few years, it has become more common for parents, grandparent or other people who are going through estate planning to include the names of loved one’s on the deed to a home or another parcel of real estate that they intend to pass to them someday. The addition of a loved one’s name to a deed also changes the ownership status of the property. Instead of the property passing to the heir upon the death of the original owner, it now belongs jointly to both the grantor and heir at the time that the new name is added. However, adding the name of a loved one to a deed also inherently changes the ownership status of the property; rather than the property passing to the heir upon the death of the person who originally owned it, it now instead belongs to both the grantor and heir jointly at the time that the new name is added to the deed.
Possessing this ownership interest impacts the financial circumstances of the person who is receiving it in a number of ways; chiefly, that they will now be considered to own half of the equity of the house in question (assuming that there are a total of two people on the deed; if more than two people are on the deed, ownership interest would be distributed among them proportionately). In Minnesota, title or deed is considered to be 100% indicative ownership. This means that, regardless of whether the property was purchased, your name attached to the deed gives you the same ownership interest as the original purchaser.
In bankruptcy this is primarily relevant in relation to something called exemptions. Exemptions are essentially categories of property that are protected by law during the bankruptcy process. The “Homestead Exemption” is one of the most important exemptions that are available to those who pursue bankruptcy. It allows people to protect their equity in the home they live in when filing bankruptcy. Importantly, however, in order to be able to use this exemption to protect your equity in the property you must reside in it at the time of the bankruptcy filing. If you own equity in a home that you don’t live in, you won’t be able to protect it with the homestead exemption. This does not mean you will be prohibited from filing bankruptcy or that you have to give up your home equity as part of the bankruptcy procedure. The first way to protect some or all of this equity is by using a separate exemption called the “Wildcard”. If you don’t own any other real estate than the property in which you received an interest, you can use the wildcard to protect the equity in the property up to a certain amount. You can also protect your equity by filing a Chapter 13 bankruptcy. This allows you to make payments over a period of three to five year, depending on your financial situation. You are generally not required to turn over or surrender non-exempt property in a Chapter 13 bankruptcy, meaning that pursuing a Chapter 13 filing can potentially allow you to protect any equity that you have in the home that would otherwise be considered non-exempt.
Lastly, you can potentially protect your equity in the home by permanently moving into the property and establishing it as your residence prior to filing. This option is usually available when a parent or other loved one has granted an interest in the home in anticipation that you will move in with them. You may be able protect your equity by moving into the home before filing bankruptcy. In speaking with your attorney, they will advise on the best route to protect any real estate equity that you might own.
Bankruptcy is intended to be a fresh start, a relief from the financial stresses that we face which grants us the opportunity to pursue our long-term goals and build for the future. We believe that this process should be open to everyone, regardless of the fact that you may have an interest in assets you hadn’t planned on acquiring. For example, you may have equity in a home that belongs to a family member. Our experienced staff is experts at tailoring bankruptcy to meet your specific financial needs. We would be happy to discuss with you the different ways we can protect your assets and interests during the bankruptcy process.
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. https://www.youtube.com/watch?v=wYjSGztT3Cw
