Q: In a bankruptcy, either 7 or 13, could I lose an investment property (single family home)?
A business partner of mine is considering filing for bankruptcy either 7 or 13. Me and him purchased a property together to rent as an income property. He's the only one on the mortgage. He's on the title and I'm on the title (via my business name). Am I at risk for losing the property if the bankruptcy trustee determines there is a lot of equity in the property?
A: You would be wise to consult your own bankruptcy counsel, not to prepare your bankruptcy, but to plan options. You might want to buy him out in one way or another, and it might be better to do that from within his bankruptcy. It is an interesting problem, but, to answer your question, yes, you are at risk of losing the property if there is equity in the property.
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A: Your business partner's 1/2 ownership interest will be an asset of the bankrupt estate. The trustee in the bankruptcy case will decide whether to liquidate the interest, and that could result in a forced sale. You will not lose your half interest. However, you may be able to negotiate a buy-out in that scenario, for cheaper than full market value, based on the fact that there are costs of sale and the property is not readily marketable with an unwilling owner (you) objecting to the sale. If your partner works out a Chapter 13 plan that allows him to pay his creditors and keep his interest in the property, then that would avoid a sale or your need to buy his interest out.
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