Quitclaim Deed Impact: Ownership, Mortgage, and Bankruptcy

Written by James Hirby and Fact Checked by The Law Dictionary Staff  

A quitclaim deed is a very simple conveyance vehicle.  It holds the statement that the person named and whose signature the vehicle bears (grantor) has quit, the legal word is remise, any ownership to the property named and conveys it to the person who holds this quitclaim (grantee).  There is no guarantee or warranty connected to this quitclaim.  The trick is that a person who owns absolutely no ownership of a property can file a quitclaim to that property.  Why might someone do so, one might ask.  To perpetrate fraud, sell someone zero ownership to a property, is a very likely reason.  The problem with a quitclaim deed is that it does not have a legal remedy if the claim is wrong, bad, not there.  The one who holds the quitclaim is left holding the bag.  Nice.

Before discussing the impact of a quitclaim on a mortgage, it is best to insure knowing what it means to a co-signer on a mortgage.  As a co-signor on a mortgage means that the co-signor’s financial position was used, along with the financial positions of the other co-signors, to obtain the mortgage.  As a co-signor on the mortgage, each co-signor can be legally held solely accountable for the remaining amount of the mortgaged loan.  “Solely accountable” means exact what is says.   For example, if three co-signors were sending money to co-signor #4, and that person took off for parts unknown, the mortgage company would come after the remaining three for its money.  This is bad business.  If one co-signor was left, that co-signor would be stuck with whatever the problem now is.  This is very bad business, indeed.

Now, it is on to bankruptcy.   The situation above is very indicative of what a bankruptcy does to a co-signor left with the responsibility of the mortgage after the debtor co-signor has had his or her responsibility for the mortgage discharged.  The non-filing co-signors must be listed on the assets and liabilities list containing the mortgage.  The non-filing co-signors may even be notified and invited to the debtor’s 341 hearing.  At that time, they may even be able to ask, “Hey, Joe.  What did you do with last three months of mortgage payments?”  If “Joe” cannot account for it, or has hidden it, the bankruptcy could be dismissed and “Joe” could be charged and tried for contempt of court and bankruptcy fraud.

So, what is the impact of a quitclaim deed on a mortgage?  True answer is that it has no impact.  A mortgage is based on ownership.  Co-signors co-own the property.  When one of the co-signors quitclaims the property, it leaves the remaining co-signor(s) with the rights, and liability, to the property.  However, a quitclaim has no impact on the accountability for the loan.  The co-signor who quitclaimed still owes that share and still has financial obligation for the loan.  If that quitclaim co-signor now goes to bankruptcy court, the quitclaim still has no impact because bankruptcy is all about finances and financial accountability and nothing about a quitclaim.  In fact, it makes little sense to have filed a quitclaim in the first place.

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