Legal Question in Real Estate Law in California

Re: Quit claim deed on property

Unless, at the time the co-borrower assumed title to the property, your wife was either refinanced-off the loan, or the bank agreed to remove her from the loan, your wife now shares in the downside of the entire mess. First, many banks are requiring that borrowers sign an unsecured note for the "short" on the loan in short-sales. They can actually pursue collection efforts even if your wife doesn't sign a new note, as the old note is still valid, and has pressumably not been paid in full. The bank, like any other creditor, can garnish wages, lien bank accounts, attach her personal property including vehicles, and lien any real property she owns. If you were married at the time the loan was taken out, the bank may even have an argument that it was a community obligation, and therefore drag you into the mess as well. You can exempt certain assets from collection efforts by creditors. The list of exemptions and amounts is too long to cover here, but suffice it to say that you may be able to protect some of your assets. There are some steps you can take to help you protect assets - you need to consult with an attorney to discuss what you can do. Don't wait until the bank is knocking on the door looking for money - many of the protections you can put in place need to be done well in advance of the bank stepping up their collection efforts.

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Re: Quit claim deed on property

The creditor cannot do anything except foreclose on the subject property unless the creditor gets a judgment against you first.

Let me answer the part about your primary residence. Under California law, you have an exemption of $75,000 in your primary residence if you are married. This means that a creditor who gets a judgment against you cannot take your primary residence unless it first gives you $75,000, which the creditor will not do unless the equity in your home substantially exceeds that amount.

However, the creditor may record an abstract of judgment lien with the County Recorder once a judgment is entered. This would efrfectively prevent you from being able to sell or refinance any real property.

You also indicate that the co-borrower will do a short sale. Your wife would have to sign the short sale documents which would indicate whether she will owe anything or not. Your wife may refuse to sign and the short sale cannot go through. In which case the property will sell at a foreclosure sale and your wife will be liable for a deficiency.

Your 401k is exempt. Your savings could be seized by a judgment creditor. You other assets could possibly be seized once a judgment is entered.

Some of your options possibly include a lawsuit against the co-borrower, bankruptcy, or entering into a payment plan with the bank.