Big House and Chapt 7

[KNECK DEEP]

Hi all,

I have just started to make my rounds interviewing lawyers and the guy I just met with said that I could expect big red flags being waived because my house is in the 500,000 dollar range and they (trustee/creditors) would want me to sell it ( no equity in it) so that they could push me into a chapter 13.


Anyone else had this exprience/issue. Also I am looking for a good lawyer in the Atlanta area.

Thanks all.

[edwards2]

You could very well have problems with a house that is so expensive. By contrast our income was high and we were told the same thing and it did send up red flags. I guess it depends a lot of what your bills are. How and why are you filing? As I said we have a high income but we had enormous medical bills to offset our income. What did your attorney say about your expenses?

[Lightning]

I'm rather curious about this one myself. To qualify for a $500,000 mortgage (which I assume you have since you have no equity), you must make at least around $1+ million a year. You're definitely in the minority of bankruptcy filers. Logically, I'd think the trustee would want you to cut your expenses so you could pay at least some of the debts.

[HHM]

Well, you wouldn't need to make 1 million a year, but on a conventional mortgage loan you'd probably have to make in excess of $100,000 per year. So, I don't know if the house is the issue as much as your income is the issue. (the payment on a $500,000 conventional note at 5.75% is about $2,917 per month, P&I only).

(Granted, he could have a special loan, i.e. interest only, negative amortization, etc, but still, how did you afford to buy and qualify for a $500,000 home and at the same time be in a position to file chapter 7).

[J Armstr]

Keep looking for a good lawyer. I talked to several before I found a good lawyer that said I qualify for a ch 7. Most would say to me on the phone because of my income my only option is a 13---this is not true. I also have a very good income, couple houses, brand new motorhome, etc.

PS A good lawyer will cost you more, but it's worth it. A close friend of mine filed Ch 7 BK 6 years ago and told me to find a good lawyer for a Ch 7. He was making $110K/yr then...

[J Armstr]

Well, you wouldn't need to make 1 million a year, but on a conventional mortgage loan you'd probably have to make in excess of $100,000 per year. So, I don't know if the house is the issue as much as your income is the issue. (the payment on a $500,000 conventional note at 5.75% is about $2,917 per month, P&I only).

(Granted, he could have a special loan, i.e. interest only, negative amortization, etc, but still, how did you afford to buy and qualify for a $500,000 home and at the same time be in a position to file chapter 7).

People with higher incomes have higher cost of living expenses...that's how we qualify for Ch 7.

[HHM]

People with higher incomes have higher cost of living expenses...that's how we qualify for Ch 7.

I understand that, I am not saying it is impossible to file Chapter 7 and make over $100,000 per year (although it will be under the new BK law), but we have no other context with this person except that he has a $500,000 house, so were trying to get more background to answer his question.

However, it is uncommon, and some trustee's get aggressive when it comes to "allowed" expenses. Just because you have a $3000 per month house payment, its an open question about whether that is a "reasonably necessary living expense" that a trustee could not object too under the circumstances.

[KNECK DEEP]

Thank you all for the replies.

The answer to your questions are as follows;

My wife makes 96K a year.
Prior to this job she was out of work for a year which put us behind the 8 ball to begin with. (turned to living off of our credit cards)

She found her current job and then around 4 months later I lost my job. I made 85k a year until I lost my job.

Then our tenents moved out of our rental property which had us paying 2 mortgages on one income. Rental property house note was 1800 a month, current house note is 3400 interest only and I have been in it under 2 years so there is little or no equity in it.

Sold my rental property last week at a 3000 dollar LOSS not including the money we put into to make it marketable.

So with living expenses, student loans, and 2 children we are in the red every month. The job market is starting to get better but I still have not had anyone make an offer to me for employment. I do not want to gamble and end up under the old rules so I am trying to get everything together now.

Hope this helps to explain it all.

Thanks

[KNECK DEEP]

Credit card debt is around 85k.

Doctor bills are about 10K

[Lightning]

I would think a trustee might have a problem figuring out why a family of 4 can't survive on $96,000 a year. Heck, I have a problem figuring that out. It's only about 3 times the national median income.

People with higher incomes don't have higher expenses, they just spend much more than necessary across the board.

I would think the people who post here in dire straits would be a bit appalled at seeing someone spend more in mortgage interest a month than their whole family earns in a month.

[KNECK DEEP]

Lightning

While I respect your oppinion, I disagree with your logic. Because my wife and I sacrificed early in life in regards to getting an education and working our way up from the bottom in our particular fields so that we could afford to do the things we once did, I do not think that I should be penalized for that.

We are all here due to some of the same facts and principles, mainly we no longer make enough money to cover the debts we currently have.

Could we have lived in a smaller house? Sure. So could a person that lives in a $200,000 home, or a person that lives in a 100,000 home for that matter.

"they just spend much more than necessary" By whose standards? Most people around the world feel this way about America as a whole. Should we all adjust our standard of living to what the rest of the world feels is really necessary?

Making more money does not make you exempt from poor decisions or job loss, or unforseen medical expenses. Regardless of how anyone 'feels', under the current law I am afforded the same protections that you and Donald Trump (went bankrupt as a billinare) are. I wonder how the trustee that handled his case felt...

Thanks again for your insight.

[hhou812hh]

Trust me folks, the average house in my neck of the woods (Nassau County Long Island, N.Y. is $490,000 with over 10k a year in property taxes. Again that's AVERAGE not upper class. The stats were released last week. It depends on where KNECK DEEP lives which will determine if he is "wealthy" or not. I am single and make about 70k a year and figured I have around 300 to 350 left with monthly disposable income. This same paycheck 1000 miles south or west of here will be fine. Here it's not as much as it sounds.

If you haven't seen this before get a look at Burt Reynolds Petition. (Not to smear Burt, I like him and wish him the best of luck) He made some bad descisions and his house is worth much more then 500k. Thank Goodness for the Fla. Homestead Exemption!

http://www.thesmokinggun.com/archive/breynolds1.html

[J Armstr]

I am in the same situation as you, but unfortunately was not able to sell our second home. Income, medical, and CC debt is nearly the same. Chapter 7 is option. Keep looking for a good lawyer.

[herekitty]

This thread is getting a little heated and I think everyone has some great points. We are all here for different reasons, but one is the same - we can't pay our bills and live our lives because of decisions we made in the past.

The point of this forum is to be realistic and to be supportive. The biggest lesson bankruptcy should teach all of us is to live with in our means - whether you make 10K or 100K. Does this mean you may have to give up a $500K house when you live in a place that middle class homes sell for around 200 or 300? Yes.

I had read a post where Minny stated that a house is just a place to live, you'll always have the memories that were made in that place. It won't be easy but sometimes it's what needs to be done to help ourselves out.

Kneck Deep - you should really see a lawyer about this situation, no one here can give you a definitive answer and the relief from nerves is not going to happen on this thread unfortunately. Many lawyers will give a free consulation, talk to a couple of them about your options and then post it here for all of us to understand.

Kitty claws retracted kids. Have a good day

[Minnymouth]

Nice Posting Herekitty!!!!

Yep, Lightening likes to get on a "roll"....... he and I "butt heads" all the time, lol.

We're all here for basically the same reason.....financial affairs we can't handle any more......

A house is a "home of memories" and "home is where the family is"!!!!

Besides, "nothing is FOREVER, and SOME THINGS are only for a short time".

No one on this forum objects to "anyone" living the good life if they have worked hard and managed right to have it.... then "fate" throws them a left punch"!!! Even Donald Trump got the "left punch"....

Medical bills will throw anyone a "left punch"..... losing a job will too......

Kneck Deep - You got see 2 lawyers (free consultation), let them suggest what options are open too you...though try to do it real soon....

Once you know your options and file a lot of the pressure
will be off your shoulders - then its "wait it out" - reorganize your life again - and "get on with living life"...

Just maybe a little different than before.....

Keep us posted on what your lawyer says, how you file, and we're here for you if you need answers or just want to vent about it.

Now I'll hush and do some reading of other post...

Good luck,

Minny