If a co-borrower on my mortgage has a significant financial change in their life, how would I or my mortgage be affected?

For example, bankruptcy, death, being sued, etc.

Asked on July 30, 2010 under Real Estate Law, Michigan

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

This question shows such foresight in to the future.  It is, unfortunately, difficult to answer completely without knowing more about your lives and how they are intertwined.  For that you need to seek help from an estate planner. I am assuming that the co-borrower is also a joint owner of the property.

In general, if your co-borrower were sued and there was a judgement rendered that could not be paid completely through another insurance policy (such as an auto policy) then the judgement creditor could attach their assets.  That would be a lien on their house, personal property, etc.  As for the bankruptcy, it depends on if there is a homestead exemption in your state, if the reaffirm the mortgage in bankruptcy, etc.  As for death, if it is a joint tenancy with rights of survivorship then it would pass to you upon death and you would be obligated for the full mortgage.  Mortgage insurance may then be a good idea.  If it does not pass then half the house goes in to their estate and how that will effect you depends on if the estate wishes to hold on to the house or sell their portion to liquidate funds. Seek help.  Good luck.


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