Joint Mortgages and Bankruptcy

The effects of bankruptcy on a joint mortgage will vary depending upon whether one or both individuals petition for bankruptcy.  It is more common for two people who share a mortgage to file for bankruptcy together as their finances are typically intricately linked. Filing for bankruptcy under such conditions essentially means that the petitioners are admitting that they can no longer make payments for their respective share of the mortgage and will therefore seek to have the obligation removed by filing for Chapter 7 Bankruptcy. Their assets will be liquidated to help pay their outstanding debts, which often includes foreclosure of the home.

If bankruptcy is filed by only one member of join mortgage, the best option is to have the mortgage modified so as to remove the individual who will be petitioning for bankruptcy. Though mortgage modification will not be easy and may lead to lower monthly payments (and thus extend the life of the mortgage), it remains the best route with the least amount of disruption to the couple or family involved. If the joint mortgage is modified so that it becomes a single mortgage, the family or couple will be allowed to retain ownership of their home once the petition for bankruptcy is granted.  Bankruptcy will then have no effect on the status of ownership.

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