Legal Question in Bankruptcy in New York

You said a mouthful!

If this is your mother's residence, she can surely keep a certain amount of the value, being the exemption amount. The exemption amount may be large enough to cover the entire interest. In Arizona, $100,000.00 in value in a person's "homestead" is exempt from creditors, including in bankruptcy. Sadly, I believe that the New York homestead exemption is only $10,000.00.

Your mother can also surely keep her interest in the home if she files Chapter 13 bankruptcy, although in that event she will probably be forced to pay a portion of the value of that interest into the plan. This depends on the value of the interest, the applicable exemption, and whether this is her residence. The problem with Chapter 13 may be that she lacks the income to make the regular plan payments required. She has to have enough income to both pay her basic living expenses and the plan payment. So, if she were to file, Chapter 7 might be the only chapter available to her.

She cannot safely transfer the home to anyone, except on a sale or exchange at "market value," within one year prior to the bankruptcy filing. This would be considered a "fraudulent conveyance," and would be subject to reversal by the bankruptcy trustee.

If your mother lost her interest in the home to the bankruptcy trustee, the trustee would become a co-owner with the other owners. The trustee would want to "cash out" that interest by selling it. The most likely buyers would be the other owners, or even your mother herself, bidding in her exemption. If the property were of substantial value or were commercial, I suppose that the trustee might want to try to force a sale of the property to maximize value, but I think it is highly unlikely that the bankruptcy court would order the sale of a residential property which is occupied by non-debtors. Also, the trustee is not likely to sell your mother's interest in the property unless the sale will yield proceeds which substantially exceed her exemption and the costs of sale. So, if it's a matter of only a few thousand dollars, the trustee might let your mother make payments on the non-exempt portion.

I guess that among the most important questions is the character of the property to her. If it is her homestead, she will have an exemption. If it is not her homestead, then I'm not aware of any exemption that would apply, and all of the value is probably at risk. The value is important, too.

Good luck.