What to do regarding borrowed monies that will probably never be paid back?

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What to do regarding borrowed monies that will probably never be paid back?

My mom and my stepfather live together in a paid-in-full co-op apartment, however they are legally divorced. About a year ago, he borrowed $80,000 from someone and signed a paper that in case he won’t be able to return them in a year, he will sell the apartment and give back the money plus all legal fees and interest (he has already paid about $20,000 in interest only on this amount). He also maxed out my mom’s credit cards (close to $15,000 on them). My mom does not have the slightest idea what kind of business he was going into, she just signed papers (please just accept the fact that she did). Obviously there is no money to pay back. My mom is on SSI already; he drives a taxi twice a week. Should she fie for bankruptcy? Does she have to sell her place?

Asked on August 5, 2013 under Bankruptcy Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

If she signed the papers, then yes, she could be forced to sell the place to honor the agreement and pay the debt. She cannot raise her ignorance as a defence: adults are presumed to read, understand, and agree to what they signed, even if their spouse asked them to sign it, unless the adult can be shown to have been mentally incompetent in some way at the time. She is also liable on the credit cards. Bankruptcy may be a good option, particularly to avoid having to sell the home, if the creditor seeks to enforce the agreement. You mom may wish to consult with a bankruptcy attorney about the specifics of her situation.


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