My sister and I jointly own a home. What happens to the house if she goes bankrupt?
-- Keith
A.
In a Chapter 13 case, the debtor keeps their property and gives the creditors at least what the creditors would have gotten in a Chapter 7 liquidation. So, in Chapter 13, the fact that the property is jointly owned only goes to how much her creditors would have gotten if there was a sale and the Chapter 7 trustee got her half of the proceeds.
A Chapter 7 case is nominally a liquidation in which a trustee gathers up and sells the non exempt assets of the debtor and distributes the proceeds to creditors. If there is more equity in the house than necessary to pay the mortgage debt, the exemption, and the costs of sale, the trustee can put the property on the market. He must show a judge first that it is impractical to sell just the debtor's half of the property.
When a bankruptcy trustee sells co owned property, the co owner gets a right of first refusal on the property. If the co owner doesn't elect to buy from the trustee, the co owner must share in the costs of sale, but not in the trustee's commission.
