If I sign a quit claim deed, can I still be held responsible for the loan, if my name remains on the loan?

Under normal circumstances you can still be held liable for payments on the loan, even after you no longer have a vested interest in the property, as long as you have signed the promissory note and other loan documents, including the Truth In Lending Disclosure, and the mortgage (or trust deed, whichever the case may be). However, there may be a glimmer of hope for you.

 The lender’s primary recourse on the loan is against the property. They can foreclose and sell in accordance with the provisions of the mortgage or trust deed. The ramifications of this to you are twofold:

1) If the lender cannot sell the property for as much as is still owed on the loan, there will be a “deficiency balance” that they can come after you for, as long as the mortgage allows it, and mortgages usually do;

2) Your credit will be affected; a foreclosure will be listed on your credit bureau report, damaging your credit score. So, if keeping your credit pristine is most important to you, then you should keep the loan payments current if the other borrower does not. However, if this is not a viable financial option for you, consider the following.

As far as a deficiency balance, the lender would normally have to get a judgment against you in court in order to try to collect it. Once they have a judgment they can attach assets, garnish your wages and the like. There is a chance that the judge may not award the lender a judgment against you if you can convince him/her that you have derived no beneficial use of the property and took no equity out at the time you quit your claim to it.

Regarding your credit, and how a foreclosure would affect it, you can always amend your credit report with an explanation so that anyone looking at it would hear your side of the matter. You can say that, all the time you were named on the property the payments were kept current, however after you quit your claim the other borrower then defaulted (only say that if it is an accurate statement, of course; or whatever variation is true). These explanations are allowed and may be done after you’ve disputed that particular item on your report, which you can do upon accessing a free copy of your credit report annually. Just go to annualcreditreport.com for a free copy of your credit report from all three of the credit reporting bureaus: Equifax, Experian and Trans Union.

I am not an attorney, but I was a lender for many years and this advice is based on my experience in that role. I would, however, recommend that you seek the advice of a good real estate lawyer in your area.

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