muck Posted April 1, 2008 Share Posted April 1, 2008 A friend of mine is really having life hand him some lemons and he is asking for my thoughts... When going through a BK, how can someone keep their house w/o losing it to creditors (other than in situations where it has little to no equity and the debtor is able to stay current with the mortgage payments)? Or is the house (and any equity in it) usually exempted (even if it has a mortgage on it)? Does it matter if the house is not in a 'homestead' state? Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 I know in a homestead state creditors cannot take the house. Liens can be filed but they cannot force a sale or move. Not sure about the rules in non-homestead states. He would have to reaffirm the mortgage with the lender during bankruptcy. Same on his vehicles if he wants to keep those. Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 Another bit of info: Ch 7 cases are much different than 13. Technically the equity of the home comes into play in a 13 and he might have to pay that out over 5 years. I'm sure the attorneys here can give much better info. It has been 7 years since law school and I don't practice. My knowledge is rusty at best. Quote Link to comment Share on other sites More sharing options...
yo mama Posted April 1, 2008 Share Posted April 1, 2008 (edited) I only know about two homestead states: Texas and California. But even in those states I'm pretty sure the mortgage lender can get to the house, as can others (like the IRS). It usually only protects you against 3rd party creditors. Edited April 1, 2008 by yo mama Quote Link to comment Share on other sites More sharing options...
muck Posted April 1, 2008 Author Share Posted April 1, 2008 (edited) Thanks. I believe that Kansas is a homestead state...but am not sure. Specific details: House was purchased 2yrs ago for $500,000. First and second mortgages total $500,000. On the tax rolls for $450,000. May appraise for as much as $600,000 (but, then again, it may not given all the wierdness in the housing market right now). He is 'sideways' in a bunch of real estate development projects and, unless he can get some lieniency from some banks AND a good infusion of capital from a 3rd party, he may have to file a BK in the next few months. Just curious if there is a way for him to protect his house (without spending thousands of dollars on a high-priced attorney to ask the same question). Also, I believe his car is paid for, he is current on his mortgage and is good with the IRS. Edited April 1, 2008 by muck Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 I only know about two homestead states: Texas and California. But even in those states I'm pretty sure the mortgage lender can get to the house, as can others (like the IRS). It usually only protects you against 3rd party creditors. The IRS can get to the house but we're OK here since he's in good standing. The mortgage company can refuse to reaffirm but they never do. They will let him keep the house so long as he reaffirms. Are we talking unsecured debts? He didn't put his home up as collateral on anything did he? Still depends greatly on whether he's filing 7 vs 13. Either way I think he keeps the house but he might be paying through the nose in a 13. Quote Link to comment Share on other sites More sharing options...
Fatman Posted April 1, 2008 Share Posted April 1, 2008 I believe Florida is a homestead state as well. Most homestead acts require that the person own the property and live there for a minimum of two years. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted April 1, 2008 Share Posted April 1, 2008 this is what i know........ on cnbc there is a bankruptcy law firm commercial and when the guy says, "but i'll lose my house if i file for bankruptcy!!" a very loud voice replies WRONG!! glad i could help. Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 this is what i know........ on cnbc there is a bankruptcy law firm commercial and when the guy says, "but i'll lose my house if i file for bankruptcy!!" a very loud voice replies WRONG!! glad i could help. Who says commercials aren't educational? Quote Link to comment Share on other sites More sharing options...
muck Posted April 1, 2008 Author Share Posted April 1, 2008 The IRS can get to the house but we're OK here since he's in good standing. The mortgage company can refuse to reaffirm but they never do. They will let him keep the house so long as he reaffirms. Through a reaffirmation, is it common/uncommon to restructure the note for a period of time (interest only, a 'no payments required for __ months' period, etc)? Are we talking unsecured debts? He didn't put his home up as collateral on anything did he? Mostly secured with personal guarantees, but I do not believe the house is pledged directly to anyone other than the mortgage company. Still depends greatly on whether he's filing 7 vs 13. Either way I think he keeps the house but he might be paying through the nose in a 13. Pardon my ignorance, but why 'pay through the nose' in a 13? Quote Link to comment Share on other sites More sharing options...
muck Posted April 1, 2008 Author Share Posted April 1, 2008 I believe Florida is a homestead state as well. Most homestead acts require that the person own the property and live there for a minimum of two years. Own it free and clear? Quote Link to comment Share on other sites More sharing options...
Fatman Posted April 1, 2008 Share Posted April 1, 2008 Own it free and clear? I'm not an authority on the matter, so I'm not going to even guess. Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 Through a reaffirmation, is it common/uncommon to restructure the note for a period of time (interest only, a 'no payments required for __ months' period, etc)?Mostly secured with personal guarantees, but I do not believe the house is pledged directly to anyone other than the mortgage company. Pardon my ignorance, but why 'pay through the nose' in a 13? When in bankruptcy, you are not required to make payments and they cannot contact you about it. However, if you are going to reaffirm then you definitely want to keep making payments. I don't think the mortgagee typically restructures the loan. Everything stays the same and the payments should be current. The mortgagee might have a special program. He would have to check with them. If he has considerable equity in the home, a 13 could be expensive. That equity could be calculated into the monthly payment to the creditors. While you don't lose your home, you might be required to pay the creditors the equity in the home. So if he has $100,000 equity, part of his payment could be $100,000 divided by 5 years (60 months) = $1666 a month to creditors. I'm not saying this will happen but it could. Chapter 13s are not truly a "fresh start." A chapter 7 would be total forgiveness of the debt, but he might lose property in the process. Some property is exempt, but my guess is this guy has a lot that would be seized and sold. I'm basing this off the fact that he has a $500k home. He really needs to meet with a good bankruptcy attorney. The consultation is free (usually) and he'll get an understanding of what his options are. Qualifying for a Ch 7 is not as easy as it used to be. He may be forced into a 13 and thus 5 years of payments. Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted April 1, 2008 Share Posted April 1, 2008 As long as he doesn't name his mortgage holder in the bankruptcy....why would they care? In Illinois, I have advised a few of my clients to file Bankos as they were in extremely horrible situations. They filed on their creditors that they wanted relief from and didn't file on the ones they wanted to keep...aka mortgages and car loans. My understanding is that if they are not named...they are not a party. Now, the bankruptcy trustee is the one who examines the asset list to figure out a repayment schedule in a chapter 13. In Illinois I have seen both 3 and 5 year payouts. My aunt worked for the bankruptcy trustee...who is usually another attorney who works for the court. So, my understanding is the mortgages are safe and there shouldn't even be any changes to them. Quote Link to comment Share on other sites More sharing options...
Double Agent Posted April 1, 2008 Share Posted April 1, 2008 You have to list all your creditors...even if you aren't seeking protection from them. You'll have to sign a declaration (under oath) that your petition is true and correct. Omitting creditors would technically be perjury. Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted April 1, 2008 Share Posted April 1, 2008 You have to list all your creditors...even if you aren't seeking protection from them. You'll have to sign a declaration (under oath) that your petition is true and correct. Omitting creditors would technically be perjury. But there is a list that you are filing on....sure you have to list them all....but you also have to segregate them as to the ones you are actually filing on. At least my aunt told me this. Quote Link to comment Share on other sites More sharing options...
Puddy Posted April 1, 2008 Share Posted April 1, 2008 But there is a list that you are filing on....sure you have to list them all....but you also have to segregate them as to the ones you are actually filing on. At least my aunt told me this. Not sure if this is a joke, but that sure reads funny Quote Link to comment Share on other sites More sharing options...
TheShiznit Posted April 1, 2008 Share Posted April 1, 2008 Not sure if this is a joke, but that sure reads funny Quote Link to comment Share on other sites More sharing options...
Puddy Posted April 1, 2008 Share Posted April 1, 2008 I didn't read you initial post close enough. I thought you just mentioned that in passing. Quote Link to comment Share on other sites More sharing options...
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