Can the mortgage company file a claim or lien against my mom's assets upon her death?
October 19, 2010 12:20 PM   Subscribe

Can the mortgage company file a claim or lien against my mom's assets upon her death?

I hate to sound pessimistic, but my mom's cancer is getting bad and she doesn't have much longer. After her diagnosis, she had a living will and power of attorney (both property and health) written up by a lawyer. Now, that I can see I'm going to be dealing with this sooner rather than later, my ignorance of the situation is adding to my stress. Believe me, her health and well-being are much higher priority than her personal property. But, I want to be prepared for this as well.

Some background info:
We live in Illinois. She has a mortgage that is likely under water (if not completely, it's close). Her assets include a car that's paid for (maybe worth 5-8 thousand dollars is my guess), and under $10k in the bank. She doesn't have any debt other than her mortgage. Currently, I'm paying her bills with her account.

So my question is...
Assuming me and my brothers do not accept the house in the will, can the mortgage company go after her money and/or car when the payments stop? If so, is it legal for us to have the car signed over to me? Also, would it be legal for me to withdraw her money, and pay her bills from my own account? My concern there is that the probate courts look at recent transactions and consider this a form of fraud, and hold me liable.

I know you're not my lawyer. I don't have expendable cash to hire one. I tried calling my mom's lawyer who wrote the aforementioned documents, and he basically didn't want to give me answers for free. I've asked friends, I've googled this, and still I'm not really getting any solid information. My hope is someone out there in Metafilter world can give me any answers or sound advice (other than to get a lawyer). If not, I will probably just take a chance and have the car transferred and move her money.
posted by Swede78 to Law & Government (14 answers total) 1 user marked this as a favorite
Use her money to pay the lawyer to answer the questions. That is a proper use of the money. It will probably not cost more than a few hundred dollars to get the answers you need. Do it right.
posted by yclipse at 12:52 PM on October 19, 2010 [2 favorites]

The only action that a mortgage company can take in the event that payments are not made on a mortgage, is to foreclose on the mortgaged property. They can repossess the house if the payments on it are not made. They do not have any legal basis to seize any other assets. Nobody is legally obligated to pay a mortgage, any more than you are legally obligated to pay rent; if you don't pay your rent, or if you don't pay your mortgage, you move out, and the property will be rented or sold to someone else who is prepared to make the payments.
posted by grizzled at 12:53 PM on October 19, 2010

I am an attorney, but I am not your attorney. This is not legal advice. You should promptly contact a competent attorney in your jurisdiction (apparently Illinois).

The only action that a mortgage company can take in the event that payments are not made on a mortgage, is to foreclose on the mortgaged property. They can repossess the house if the payments on it are not made. They do not have any legal basis to seize any other assets.

This is not true. Please do not make such uninformed claims. An Illinois mortgage holder may seek a deficiency judgment if the house is underwater or if the foreclosure sale otherwise does not cover the mortgage.

Nobody is legally obligated to pay a mortgage, any more than you are legally obligated to pay rent

People are routinely legally obligated to pay mortgages and rent. A mortgage contract is a legal obligation, as is a lease.
posted by jedicus at 1:02 PM on October 19, 2010 [5 favorites]

I came in and typed and retype and deleted again what jedicus just wrote in response to grizzled because I participate more in legal ask.mes than I am comfortable doing. But jedicaus is right and grizzled is just plain wrong. For one thing, a person is quite legally obligated to pay a mortgage and quite legally obligated to pay rent under the terms of a lease; otherwise there'd be no legal basis for enforcement when you didn't pay. For another thing, as jedicus says, other assets most certainly can be at risk in a foreclosure (I practiced in Illinois for several years at a firm with a large foreclosure practice). For a third thing, moving assets around in anticipation of probate can get you in a fuckton of trouble.

You cannot navigate this without an attorney. Pay one now, or pay one later. It's up to you. It'll be less expensive and less stressful to do it now. I am sorry that you're dealing with this at all, but the short answer to "Can the mortgage company file a claim or lien against my mom's assets upon her death?" is Yes. And the long answer to "what can we do to protect the assets since we don't want the house" is "hire an attorney to advise you."
posted by crush-onastick at 1:24 PM on October 19, 2010 [3 favorites]

I know you don't want to hear "ask a lawyer", but this is precisely what attorneys are for. If you have power of attorney, you can write checks from her account to pay bills, including to an attorney for estate planning. It's well worth it.
posted by bedhead at 1:53 PM on October 19, 2010

Yeah, Illinois is a recourse state. A fact I discovered using an elite legal database called Google (seriously, grizzled, wtf?). That means that they can in fact come after the rest of her assets. You are right to be concerned about how the court will view your asset shuffling. My guess is: poorly. Seriously speak to a lawyer because what you are doing might be considered fraud.
posted by atrazine at 1:55 PM on October 19, 2010

he basically didn't want to give me answers for free

Of course he didn't. Lawyers charge for their advice. It's what they do for a living. You don't want free advice on this one. The money paid will be well worth it.

You don't have to consult the same lawyer your mother did if you don't want to, though. You need to determine whether he's the right person to speak with (based on your level of comfort with him, his reputation with other clients of his whom you know, his familiarity with your mother's documents, etc.) and then, if you decide not to consult him further, get another lawyer.
posted by ocherdraco at 2:01 PM on October 19, 2010

grizzled: I see you are in Ontario. FYI, in your province (and in all others bar Alberta) ALL mortgages are recourse - in other words you can't just walk away from it.
posted by atrazine at 2:03 PM on October 19, 2010

I am a lawyer in Illinois, but I do not do estate or property work. All of the standard disclaimers about not being your lawyer apply.

To close out your mom's affairs, you will need to open a probate estate. Even though the estate is small, I believe that in Illinois you cannot use a Small Estate Affidavit if the decedent owns real estate. I know you do not want to hear this, but to do this with the least amount of pain you will need a lawyer. I have had two family members die recently and my family assumed I would just handle things; the law was so goofy that we hired a probate lawyer in both cases.

One thing to keep in mind is that you don't technically get to take anything of value under your mom's will until the estate's debts are satisfied. So you don't get to choose to take money and the car, but "not accept the house" and leave the bad debt there. If the estate can't cover the debts, you are not liable for them. But you can't take the value and leave the debt.

As for the house question, I just went through this with my aunt's house. She was underwater by about $15K, and had assets just barely sufficient to cover. External factors (that I will not get into here) intervened, but we initially planned to strike a deal with the bank to voluntarily hand over the house. This is called a "deed in lieu of foreclosure." Essentially, you are saying to the bank "we can't make these payments, just take the house back and let's call it even." The bank doesn't have to take the deal but they may well be open to this because (1) foreclosure is a long, expensive process for them and they would have to jump through those hoops without the deal (so this saves money and time); (2) the likelihood of getting the house back in reasonable shape is better with a deed in lieu (so the resale value is better), and (3) if they are a big bank, it engenders better feelings (as compared to chasing the estate of a woman who just died of cancer). If you plan to pursue this, read up on it and go to the bank to make a friend. Be very nice, and explain your situation, and see what they have to say about it. You can honestly state that after expenses the estate will not have enough to make the bank whole. They may well have specialists who consider these things and can negotiate with you. Your probate lawyer might be able to assist you here.

As for the transfer question, this is not a good idea. Illinois has the Uniform Fraudulent Transfer Act, which allows creditors to attack transfers where they are made for purposes of avoiding claims or where they are made without getting equivalent value in return. With such a small amount at stake, maybe nobody would ever make a fuss. But if they did, taking all of your mom's money and her only substantial asset in order to protect against her largest creditor would almost certainly meet the definition of a fraudulent transfer. It's not worth the risk.
posted by AgentRocket at 3:44 PM on October 19, 2010

Are you by chance in Cook County, Illinois? If so, your local sheriff may halt foreclosures starting this Monday. You should still see a lawyer ASAP, but it's something to keep in mind.
posted by Asparagirl at 4:10 PM on October 19, 2010

Response by poster: Thanks you all for the responses. It sounds like moving assets is not a great idea. I guess I never thought of using my mom's money to pay for a lawyer, as I still look at it as her money. I'd actually like to see her spend it on herself (maybe hire an in-home nurse instead of living her last days at a nursing home).

I just found another document she had the lawyer write up... a Declaration of Trust. This looks like it basically says who gets what using a lot of legal jargon. Is this what a probate lawyer would provide? Other than answering some questions (which I intend to do now), are there any other documents I should ask about to handle this situation?

Asparagirl: No, I'm not in Cook County. But, I'm not interested in moving into her house, nor taking over the payments, nor delaying a foreclosure. But, thanks for the info anyway.

ocherdraco: I understand the lawyer's time is valuable. But, to ask 10 minutes of his time pro bono "after the sale" seems reasonable to me. I would never charge a customer of mine if they had a few questions about a product or service I already sold them. I was on the phone with him for literally less than 5 minutes (I have a timer on my phone). Obviously, I won't use him again.
posted by Swede78 at 6:59 PM on October 19, 2010

Call the county Bar Association and ask their help finding sliding scale or pro bono legal help. Google [your location] legal clinic, and [your location] legal aid. Check in with the local courthouse (county superior court?) for self-help resources. I just went through this and foreclosure was a topic fairly common to see assistance offered for, and there were a few probate resources too.
posted by slidell at 9:39 PM on October 19, 2010

The reason that using her money is proper is that it is her assets you are dealing with.

A trust would be an alternative way of disposing of her assets. Whether it would avoid the claims of creditors varies from state to state. But it's only an alternative container - it only works if it has something in it, if it was properly drafted, etc.

Talk to a lawyer. Pay him for his time.
posted by yclipse at 4:28 AM on October 20, 2010

Just an aside from my own experience with my mother's estate. DO NOT CO-MINGLE her money and yours. The courts look askance at anything that is not straight and narrow and very easy to follow. You would end up with a lawyer to cover your assets if you do.
posted by ptm at 6:33 PM on October 20, 2010

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