My girlfriend's X is a real deadbeat. Last week, she got a 1099-C from a bank that he had borrowed from to buy a car, failed to pay off, and they had apparently discharged the loan, sending my GF the 1099-C because she co-signed the note. She took it to her CPA and she inquired if my GF's X was planning to declare bankruptcy. My GF didn't know so she inquired and her X responded with a "not yet", perhaps implying that one is in the works.
So, here's the question: During the divorce, my GF was awarded the house they had lived in. Frankly, the house had been deeded to her several years before that my her X because he borrowed a large amount of money from her 401K and she wanted something to secure it. In the end, he lost every penny of her money trying to flip houses. None the less, fast forward to the divorce. The deed is in her name alone, but the mortgage and an equity loan taken against the mortgage are still in her X's name. My GF has been paying these two loans for almost 3 years now, always on time, for more than the monthly service and she has gotten rid of all the arrears her X had built up on it. As I mentioned, in the divorce, the judge confirmed award of the house to her and gave her three years to refinance the house out of his name. It's now been about a 2 years.
Ok, finally, here's the question really: If her X now files for bankruptcy, can the bank immediately call in the notes and force my GF to pay it all off or face foreclosure? She is still rebuilding her credit and needs the extra year to really make sure that she can refinance with her bank and to get a good rate.
A few added notes: She did file a claim on the house under the MA homestead act. She was never a signatory to any of the debts accrued by her X husband and is not obligated to pay any of them under the divorce agreement. We have read some information that seems to indicate that the bank is not obligated to foreclose if the note is current and being paid, but also made it sound like it might be discretionary on the bank's part. We also read some information that seems to indicate that you can exempt the house if it's a homestead under MA law, but since my GF isn't filing for bankruptcy and her X is, how is she affected?
Complicated, but thanks for your help.