How to protect co-owned real estate property if business partner files bankruptcy?

UPDATED: Jan 4, 2011

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

How to protect co-owned real estate property if business partner files bankruptcy?

I co-own a house in WA as rental property with a friend with no mortgages. The title is clear under both of our names, and my proportion is 21%. Now all my friend’s houses in CA went into foreclosure (she hasn’t filed bankruptcy yet). We didn’t form any business entity, but she agrees to write a partnership agreement, and she wants to transfer her title under someone else’s name in order to protect our house. Would the creditor still be able to claim the house even if it is paid already? How can I protect my asset? What needs be included in our contract? Would it be different if I am an alien?

Asked on January 4, 2011 under Real Estate Law, Washington


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

1) If there are creditors of your partner/friend and she owes them a remaining balance even after her foreclosed properties are sold at foreclosure sale or auction, then they can go after your friend's interest in this home. They can, if they sue her and win, look to put a lien on it so that it can't be sold without paying them off--again, at least  up to her interest in the home. This sort of lien doesn't foreclosure or force a sale, but it could make selling difficult, since it's a cloud on title that must be satisfied.

2) Speak with an attorney, such as a real estate attorney, about what--if anything--you can do. It may be too late for  the friend to transfer title--doing so at this late time, after she's already in default on other obligations, could be seen as an attempted fraud on creditors and set aside. This is a complex situation--you need legal counsel.

3) In the future, own property through a business entity to protect it from a partner or shareholder's  personal defaults  and debts.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption