The principle of exoneration can apply when a single joint property-owner uses it as security, with consent of the other owner, for a loan made solely to the two parties. The other joint owner in such situations does not enjoy the loan-benefit. The joint owners usually are husband and wife, but it is not necessary for them to be married for the doctrine to be applicable.
Dictates of the Principle
The exoneration doctrine in essence dictates that a loan which is solely to the benefit of one party should be paid out firstly of that party’s share. In such case, the other mortgage-party should be seen only as a surety, with their share only being utilised in case of a possible subsequent shortfall. The practical effect and legal reasoning behind the doctrine are both not very simple.
The doctrine of exoneration presumes the intentions of such two parties along with their roles in the transaction. It includes defining who the principle and surety are, although both of them have under the mortgage the same legal obligation and both their share of entire property gets mortgaged. The principle of exoneration absolves the co-owner of any blame for the loan. Given they did not get the benefit out of it, they need not be held as being primarily responsible for repaying it. That primary role rests entirely with the party to whose gain the loan was made.
The over-riding aspect is that the loan has to be utilised for a distinct purpose that is separate from and does not involve the other co-owner. If both husband and wife for instance both stood to gain from such a loan, the husband shouldn’t be the only one bearing the initial responsibility of making its repayment. A bankruptcy trustee obviously of one of these parties would want to know if both parties gained from the loan along with what extent the estate’s interest in their property is liable to the debt. Any part of the secured debt applied for a joint purpose will not enjoy the benefit of the exoneration principle.
Example of the Principle Applied
George and Jane own a house that is worth $400,000. John borrows $250,000 to finance a commercial entity in which Jane bears no financial interest. This loan is borrowed against the property they jointly co-own 50/50. George then declares bankruptcy soon after venturing into his start-up business.
The Bankruptcy Doctrine of Exoneration in such case will not keep the lender from selling George and Jane’s house to take care of his business loan. The remaining house-proceeds will nonetheless not be shared 50/50. Rather, if the house sells for $400,000 for example, the $250,000 is first deducted to recover the business loan and $150,000 remains.
Since Jane originally had $200,000 equity invested in the property as did George, Jane will keep the entire $150,000 while George gets nothing. If the bankruptcy trustee or creditors were expectant of gaining access to a part of John’s house for offsetting other debts, they would be quite disappointed. This is because George will have no equity left within the house for applying to anything else apart from the business loan. For more details please visit this site https://www.debtmediators.com.au/bankruptcy/bankruptcy-doctrine-of-exoneration/
Do you have a massive debt problem? You might be thinking of hassle free debt solutions so you can rid yourself of debt once and for all. It is not going to be easy; if you expect a quick solution, then you will be disappointed. All methods require a lot of work and discipline on your end before you can attain financial freedom. Below are some of the top methods for debt solution so you can avoid filing for bankruptcy.
Finance experts list bankruptcy as one of the most life-altering negative events that you could encounter. It is among the same ranks as divorce, illness or death of a loved one. Moreover, the bankruptcy record will exist in your credit report for a long time, further crippling your chances of obtaining loans within the near future.
Often, when you find yourself in a tight spot and you think bankruptcy is the only way to clear your debts, there are a few last-ditch moves you can make. Here are some ways to settle your debts without becoming bankrupt:
Settle or Negotiate
Chapter 7 bankruptcy gives your creditor the power to liquidate your assets, which will in turn be used to cover for the amount you owe. Depending on your debt, your assets or properties will be relinquished to pay back your credits and still have some money to hold on to. But this is just one of many options. You can choose to enter into a negotiation with your creditors.
If lenders are desperate to get their money back, they are willing to enter into a deal. You can devise a new payment plan and schedule agreeable to both parties. If you find it difficult to meet monthly payments at your current financial state, you can promise to make a lump sum payment at a later date. Whatever the agreement is, you must have a proposal plan before you meet with negotiators for hassle free debt solutions.
Sell Your Assets
If you have any valuable asset that you no longer use or need, you can sell them to pay off your debts. This can be included in the Chapter 7 bankruptcy but the downside to the latter is that you have no control over which properties are relinquished. If you choose to sell your properties yourself, you have control over which you wish to sell. You can then use the money to pay off all of your debts. Debt Helpline debt solutions can help you create the perfect plan on how to use your assets to gain the funds you need to become free from debt.
If you do not own a property or asset that comes with a huge price tag, you can still use any money you earn to ease up your debt problem. You can also use it to make a lump sum payment to your creditor until you can sort out your finances.
There are many hassle free debt solutions available and bankruptcy is not the only solution. You can choose from any of the above mentioned strategies or consult with a credit counselor about your other options. For more details, just visit HTTPS://WWW.DEBTHELPLINE.COM.AU/DEBT-SOLUTIONS/