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  1. #1
    Join Date
    Oct 2011
    Posts
    4

    Default Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    My question involves bankruptcy in the state of: Texas

    I have a joint investment property that is currently being rented. The rental payments have been going to my co-borrower on the property.

    The co-borrower has missed the last two mortgage payments and I was just contacted by the bank. I have now found out from the co-borrower that he has filed for Chapter 7 and he stated he will continue to collect the rent and pocket the money.

    Meanwhile, my credit is getting destroyed, the property could foreclose, etc.

    Is this a form of fraud? What are my options here? I would like to stay clean here.

    I have reached out to the tenents and asked for them to send the payments to me. Considering paying the last two late payments out of my own pocket so I do not take the hit.

    If he is fileing bankrupcy what can I do??

  2. #2
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    Quote Quoting Texas78734
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    If he is fileing bankrupcy what can I do??
    duck because all the crap is now going to come flying your way.

    Do you have some form of formal partnership or LLC or anything?

  3. #3
    Join Date
    Oct 2011
    Posts
    4

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    No sir, I have no partnership. I am a single mom, have excellent credit. Very concern and upset and have no idea what to do.

  4. #4
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    well, you are in a pickle, especially if you have no rules due to a partnership or some other formal joint business adventure.
    Is there any positive net worth in the property? Can you carry this by yourself if you lost your partner?

  5. #5
    Join Date
    Oct 2011
    Posts
    4

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    Thats I will work to contact an attorney on Monday. I cannot carry the note alone. Even with the rental income there is a delta between rental payment and the actual mortgage amount. Without the rental income I just cannot do it.
    I pleaded with the tenants who are good christian people. They have agreed to pay the mortgage directly to the mortgage company directly and I will pay the delta to ensure it is current. Any issues with this?
    My other question is, is what he doing fraud or illegal in any way?

  6. #6
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    since you have no real rules or agreement as to how to handle the money, it isn't illegal for him to take the money as he is. Your solution would be to sue him for what you believe would be your share.

    I suspect you should be able to see that he is divested of his share along with his discharge of the debt through the bankruptcy. That would result with you as sole owner and sole debtor. What you do after that would be up to you.

  7. #7
    Join Date
    Sep 2010
    Posts
    478

    Default Re: Co-Borrower is Filing Chapter 7 and Pocketing Rental Income

    You need to verify that he filed bk. Call the bk court in your locale and ask for a case number and the name and phone number of the Trustee. If he filed a Chapter 7 ALL rents collected after the case is filed belong to the bk estate unless the lender has a valid assignment of rents. Call the Trustee so that the Trustee can demand the turnover of the rents. That will at least stop the co-owner from pocketing the money but, it will not get the money paid to the lender (unless there is an assignment of rents clause).

    You may very well have to pay the mortgage to keep the property out of a default status. Depending upon the way the lease is written, you may be able to claim that you are entitled to 1/2 of the rental income that is collected by the Trustee. In addition, you may be a creditor in the bk. You will want to talk to a bk attny who handles creditor representation.

    Des.

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