Phoenix, AZ asked in Foreclosure for North Carolina

Q: My mother in law died. We co-owned a house. She defaulted. Her bank tried to foreclose on her. Can we do anything?

We owned a house together in NC. We filed for bankruptcy and the bank tried to foreclose on our portion. The foreclosure never went through. Our bank gave up. My mother in law then became ill and defaulted on her part. Her bank was trying to foreclose on her portion of house. How can they when she only owned a small% of it, per the deed? Is it not a clouded title?

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1 Lawyer Answer
Rachel Lea Hunter
Rachel Lea Hunter
  • Consumer Law Lawyer
  • Cary, NC
  • Licensed in North Carolina

A: OK - let me get this straight - you and mother-in-law jointly owned a house - how - as tenants in common or as joint tenants with right of survivorship?

Foreclosure would make sense only if the property was mortgaged - who was liable on the mortgage? You or your mother-in-law or both?

If you filed for protection under the bankruptcy code, bankruptcy acts like a shield around you. It is improper to foreclose while you are in bankruptcy. If the foreclosure was started before you filed, then it would be halted by the bankrutpcy. It could resume or take place after the bankruptcy. The only possible exception to this would be if you filed and intended to discharge your liability for the mortgage in bankruptcy and nobody was paying the mortgage. In that case, the bank would request that the bankruptcy court lift the automatic stay and allow them to foreclose. This scenario might make sense if you filed a chapter 7 bankruptcy but not if you filed a chapter 13 bankruptcy because you would keep paying for the mortgage.

Something else you mention does not make sense. There can be no foreclosure on part of the property. And there cannot be a default on a portion of the mortgage either. If there is one jointly owned piece of realty encumbered by a mortgage, the whole property is included. So who was on the mortgage? Foreclosure by your lender would only make sense if you were solely liable on the mortgage OR if both you and mother-in-law were liable but you filed bankruptcy and mother-in-law stopped paying.

If nobody is paying the mortgage then of course the lender will foreclose. If your liability on the mortgage was discharged by your bankruptcy and if mother-in-law stopped paying then lender will foreclose. The lender must notify all the record owners of the property of the foreclosure. It does not matter how much of the land is owned or the percentage.

I don't know what you mean by a cloud on the title. Partial ownership is not a cloud on the title. A cloud on the title would exist if for example, a common owner owned a big tract of land that got subdivided when the common owner died and parcels sold off. What usually happens in these cases is that people by the different parcels at different times and sometimes the deeds are incorrect such that one person thinks they are buying a certain parcel with so many acres and actually buy a smaller or larger piece as shown by more modern surveying. If another owner of an adjoining parcel claims all or part of the same tract as shown by a survey then a cloud on the title would exist and the parties would have to resolve the boundary by agreement or by a court action to remove the "cloud." This is not your situation.

Since it is not possible to figure out what is going on here, I suggest that you take the deed, mortgage and foreclosure documents to your bankruptcy attorney for review or that your mother-in-law take the documents to a real estate attorney specializing in foreclosure defense to see if anything can be done. The real issue may be whether someone lives in the home and wants to save the home. If the answer is yes, then mother-in-law may need to file a chapter 13 bankruptcy if she can afford to pay the mortgage.

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