I had question about a judgement creditor lien which was filed at land titles against my house. I had a meeting a couple months ago about filing for bankruptcy and then decided against it as we wanted to try to settle our debts ourselves. My wife and I are trying to sell our condo right now and but don’t want a creditor to put a lien on it and risk my wife losing some of her money. I just realized that I am only a guarantor on our mortgage and not an owner. I wanted to ask about a creditor lien on property.
As all of the personal debt is in my name, I would like to know if I file for bankruptcy would a creditor still be able to put a lien on our condo? Can my wife sell the condo and keep all of the proceeds for herself?
Answer: This is your answer regarding debts and claims and creditor lien on property .
If you have a property, that is if you name is listed on title at Land Titles, then the property in some portion at least, is yours. Thus if any of your creditors sues you and is successful in that they can prove that you owe them money, then they can take that “proof” in what the court decides, called a “judgement” and record that judgment at Land Titles against the property. Any property must have “clear title” or have the judgement removed before it could be sold, so if you were selling it outside of a bankruptcy, then you would have to pay off the judgement.
However, once you declare bankruptcy any “judgement creditor” or those that are registered against your house or property cannot stay on title and by virtue of the bankruptcy would have to remove themselves from the Land Title registry. So, if you were bankrupt, the judgment creditors, if any, would have to come off title. Further, if you were bankrupt, no creditor could begin or continue with any court action so they would not be able to register on title or sue you, during the bankruptcy process. For a creditor to register a Judgement on Title of a property, you would have to be the debtor (owe the money) and be an owner of the property.
As well, if you were to go bankrupt and living in the condo, you could keep up to $12,000 in equity from the Trustee and creditors, whereas, if you sold the condo and were not bankrupt, any equity you receive in cash would be something that your creditors could go after as it would be “cash” and no longer a condo. Thus some people who have debts and need to declare bankruptcy will declare bankruptcy prior to selling their principle residences as they know that in a bankruptcy, once the property is sold, they can keep the first $12,000 in net proceeds.
In your case, when you were talking to us it may be that we estimated that your equity in the condo was beyond the $12,000 which is why you were concerned about creditors going after this asset? I am not sure. However, now if it is clear that you are not the owner of the condo and thus would not be eligible to receive any sale proceeds, then yes bankruptcy would definitely be an option for you.
I suggest that we discuss your situation in person again to decide which option is the best for you.