My parents loaned me money to buy out my partner's portion of my house. We signed a personal guarantee on a line of credit for a business venture. Business venture turned bad. Partner is considering filing for personal bankruptcy. My name is still on the line of credit. I now have over $40K in equity in my house due to the money loaned by my parents. If I get a promissary note done up will my parents get their money back if I have to declare bankruptcy? Secondly would I be forced to sell my house.

If your parents did not take a secured charge against the house when they loaned you the funds, they are an unsecured creditor and will receive the same as any other unsecured creditor in the bankruptcy. I'd suggest you and your parents may want to talk to a lawyer about securing their interest in the property. It's unlikely that you would be forced to sell the house.

Ann Clarke
phone: (403) 296-2972
aclarke@moneyhelp.ca