What happens to a home equity loan if one of the parties files for bankruptcy?
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What happens to a home equity loan if one of the parties files for bankruptcy?
My husband and I are divorcing; it will be final on the 15th of this month. I owned the house prior to marriage and he has signed a quit claim deed. We took out a home improvement loan and had to use the house as collateral. I am not on the loan because of my credit. He and his grandparents are; they had to co-sign. He has informed me that if he has to pay any part of the marital debt (the loan) he is going to file bankruptcy and if that leaves me and my kids wit out a home so be it. Can he do this?
Asked on May 8, 2014 under Bankruptcy Law, Illinois
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 9 years ago | Contributor
Under federal law the equity loan attached to the home as security and those that signed for the loan are personally liable under it unless discharged in bankruptcy. If the loan is not serviced then you can lose the home on a foreclosure by the secured lender. I suggest that you consult with your presumed family law attorney regarding this matter. If you have none, I suggest that you find one. One in your locality can be found on attorneypages.com.
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