In the bankruptcy case of Stanfield, Daniel K. and Sharon E.; In re (Stanfield v. First Midwest Bank)
, the bankruptcy court ruled that the defendant's/creditor's mortgage was void because the defendant/creditor failed to get both spouses' signature.
The details of the bankruptcy case:
"In 2005, the defendant loaned $20,000 to the debtors' business. Each of the debtors individually guaranteed the loan, which was secured by a mortgage on the debtors' home. After the debtors filed for Chapter 13 relief in 2007, they asked the court to avoid the defendant's lien because only the debtor-wife signed the mortgage. The defendant acknowledged that the husband did not sign the mortgage, but argued that it was still valid even though state law requires the signatures of both spouses to pledge a marital homestead as collateral for a nonpurchase money loan."
The bankruptcy court ruled that the creditor's mortgage should be voided because he failed to satisfy the state's law requiring that both spouses sign the mortgage or provide proof that the husband intended to convey his interest in the property. The bankruptcy court further noted that voiding the mortgage was fair because the defendant/creditor was a sophisticated lender and therefore obligated to verify that his documents were satisfying the law.
Failure to create mortgage documents that adhere to the law is more common than you think. If you're considering bankruptcy and suspect that a loan document was not created properly or falls outside the standards of the law, please discuss that issue with your bankruptcy attorney.
(Consumer Bankruptcy News, Volume 19, Issue 18, page 19)