Helpful Advice on Ch. 7 Please!

[Needsomerelief]

Just want to say, great informative board here!

My problem, wife is not working now, she is 8 months pregnant. Have consulted with paralegal on a Chapter 7. Means test is not a problem. I had my house appraised, because the old one was 3 years old and attorney recommended it. Well, we fall barely below the exemptions for NC, have about 48,000 equity in the house. I have equity$2200 in one car and all my CC bills(30,000 with very low interest rates-2.9% to 7.9%) and mortgage is up to date, problem is my wife cannot pay her CC bills that she has and I was not even aware she had them and I did not sign for them(25,000). AFter the appraisal I paid for, the attorney said since it was so close the trustee might opt to get another appraisal and try to take the house. Well, I said forget it, i'm up to date, I have a call in to see if my wife can file a Chapter 7 by herself, since she is already 5 months or so behind on paying here CC bills? Just was wondering, since we are both on the deed and mortgages, and also her dad has lifetime rights to the property, can they somehow take my house and what they will do? She has one vehicle that I am cosigner on with negative equity. My other 2 cars are in my name only and paid for.

Also, she has about 3,000 in medical bills, but I believe, since i'm not filing, they can try to tack that on to my bills, which would suck, but i'll just pay them a little monthly so they can't collect. Main thing, I can't pay her CC bills and I definately want to keep my house.

Makes life very hard, when my third child is almost here

Also, with all the reading that most trustees abandon taking the property when there would not be much $$$$ made, don't see why we both can't file. Dealing with one of the top rated attorneys in NC for bankruptcy, but always going through the paralegal. Maybe I need to counsult another?

Some more info, TAx value on house is 258,000, appraisal was for 250,000, 3 years ago, it was 240,000. We owe 202,000 secured. Straight exemption is 37,000 for husband and wife, guess the attorney figured in the 10%, closing costs to sell etc........that must be what eat up the 11,000 after exemptions? Just a big mess and headache

thanks for reading.

[SinkingFast]

Trustees tend to go after assets where they are sure they can get $$$'s. Houses are the worst for BK Trustees.

Trustees hire someone else to sell the property just like most people hire a Realtor. Trustee's costs to sell run around 10%. Also Trustees typically sell quick for less. So when a Trustee siezes a property, they have to be sure the property will bring enough money to:

Pay the Mortgage Lender,
Pay you your Exemption,
Pay their costs to sell.

Example,........... $100,000 house less $10,000 to sell is $90K. With $22K in equity, that would mean you have a $78K mortgage plus your $20K in Exemptions to apply. That's $98K. That means the Trustee can't really sieze the house, sell it, and pay everyone.

Also, Trustees like neat, clean, tidy packages. Dad having lifetime rights to the property throws a fly in the ointment there.

Chances are, more likely, the Trustee will want you to pay the excess difference between your allowable and the real market value. So you're talking $2K max there. Many times, Trustees just offer to settle. You might wind up being asked to pay $1K on the house.

Your wife could file alone, but there's some adjustments you'd need to make before she files. You'd need to seperate yourselves financially as much as possible.

If you have a joint bank acct, you'd need to take her name off the acct and open a new one in her name only. If she's an authorized user on any of your CC's, you'd have to take her off of them.

Don't close any accts. Don't transfer title on any assets. The look back period is one year. Your wife would have to disclose all that when she files BK.

If your wife does decide to file alone, saving your Credit for the future of your family could be a good thing.

[Emmy]

Pay the Mortgage Lender,
Pay you your Exemption,
Pay their costs to sell.

I did not know this! Is this always the case with exemptions that they will pay you the exemption cost upon taking an exempted item? I was wondering if exemptions were really safe or if the trustee could override them somehow.

Hubby has a $600 aluminum boat and some guns that were passed down to him upon his father's death. The total worth of both could be put on the wild card exemption but he is wondering how safe exemptions are.

[SinkingFast]

Yep! The Trustee has to pay you what ever you claimed in the way of an Exemption on any property that's siezed and sold.

[Needsomerelief]

I think I need to talk with another attorney before I do anything! Always good to have your ducks in a row. This exemption thing and what they might do, can get confusing. I do know one thing, not going to borrow into my equity until I know what can be done to protect it.

Thanks.

[Emmy]

Yep! The Trustee has to pay you what ever you claimed in the way of an Exemption on any property that's siezed and sold.

That almost makes no sense though. Why take an exempt item if they are paying the value for it to you? They must only do this is they think your lying about the items value and think they can get much more than what you've stated it's worth.

[SinkingFast]

That almost makes no sense though. Why take an exempt item if they are paying the value for it to you? They must only do this is they think your lying about the items value and think they can get much more than what you've stated it's worth.

Think about a car, for example.

Trustees work with auctioneers on a regular basis.

Say your State allows $2500 in Exemption and you have a car you own outright that's worth $5K. The Trustee thinks at sale, the car might probably bring $4K.

Trustee siezes the car, has his service sell it, pays you your $2500, and the Trustee makes $1500 "for the benefit of the Creditors". Really, the Trustee get's $1500 that he/she get's to take a %'age of, pays a fee to the auctioneer, and distributes the rest to Creditors.

Siezing property isn't about paying you your Exemptions, or distributing the proceeds to your Creditors. It's about padding their own wallet. Every dollar the Trustee makes on behalf of the Creditors, he/she gets to pocket 8%, 10%, or whatever. And you are correct. Sometimes Trustees do suspect that people under value things.

The purpose of Exemptions is to allow insolvent, bankrupt people the opportunity at a fresh financial start with a small amount of property and assets.

[Emmy]

Interesting Sinkingfast! I'm learning so much here. In your example why wouldn't the trustee just tell the person, your car is worth $5 grand, you will need to pay me $2500 to keep it. That's what I thought they did automatically if the exemption was worth more than what your allowed. Plus that seems like it would make him more money that taking the car and selling it himself.

[miss puff]

That's when the Trustee plays "Let's make a deal". Let's say like Emmy said, the car is worth 5,000. you get to claim 2,500 as your exemption which leaves another 2,500. To the Trustee it might seem less hassle to say if you pay say 1,200 they won't even bother with all the hassel of sale and reposessing the vehicle. Money talks

[miss puff]

I do know one thing, not going to borrow into my equity until I know what can be done to protect it.

Thanks.

Absolutely do not do this!!! And do not cash out retirement accounts!!! Those are protected!

Welcome Needsomerelief

Is your wife going to these consults with you?

[SinkingFast]

Exemptions are what you can keep.

In the case of the car, the Exemption says you can have a vehicle worth $2500. If you own a new car with a loan on it, the $2500 might not be a problem. In a loan situation, that's $2500 in equity. Value of the vehile less what you owe.

Same thing with your house. If you're allowed $10K Homestead Exemption, that's $10K in equity on the house that you can protect.

Exemptions aren't what you have to pay. Exemptions are what you're allowed to keep.

If you have more equity than you have Exemptions to protect, then you might get to play "Let's make a deal" with the Trustee as Miss P suggested. Or you risk loosing the property. Either way, the Trustee has to allow/pay you your Exemption you applied to the property.

[Needsomerelief]

Well, I might have to tap some equity out to protect my house. I definately need to file, both of us, one of my cards is trying to almost double my interest rate, and they wonder why people file BK..........they seem to push it. If I get an equity loan, what is the waiting period to file so it doesn't look bad? Just going to get enough to make sure the house is protected with the exemptions! What a mess
Thanks.