If a family member loaned me the money for my mortgage but they are now filing bankruptcy, how can this affect me?

I’m a young adult with little credit history and didn’t want to be eaten alive in interest, However, they are now having to file bankruptcy. I know there’s a trustee in the mortgage. Does the agreement transfer to them? The friend is saying that I have to sell my house immediately but I don’t see why.

Asked on June 20, 2017 under Bankruptcy Law, Maryland

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

No, it doesn't affect you if you are the one who was loaned the money but the person who loaned you is filing bankruptcy. Their bankruptcy affects their *creditors*--the people or businesses to whom they owe money. But it has no direct effect on anyone to whom they owe money. The only indirect effect it *may* have is that if the loan agreement enabled them to call for repayment early, then the bankruptcy trustee, whose job it is to find as much money as possible to repay creditors could potentially exercise that option. But that is ONLY if the terms of the loan specifically allowed the lender (the family member) to demand early payment. If it did, the trustee could make you repay early...but otherwise, this has no effect.


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