Really need help and opinions....

[losing_it]

[StaciMM]

A couple of quick thoughts-you will need to bringing in a steady income in order to file a ch. 13.

At this point, you would qualify for ch. 7 based on income/expenses I'm sure (last 6 months divided by 6 is the # that is used and from what you've state that # for you is somewhere in the $1000-1500 range).

Regarding exemptions-what you can keep if you file a ch. 7 in SC-I'm seeing $5000 equity in home, $2500 in misc. personal property, $1200 in a vehicle, and $500 in jewelry. **I don't know for sure if these #'s are completely up to date but shouldn't be too far off.

The end result is that you will likely lose your home (but come out of it w/ $5000) & the bike. You'll probably be able to keep your car, though you may need to pay the difference in what it is worth and what you're allowed to the trustee. You wouldn't have to move out of the house immediately-the timeline varies by state/district but you could at least live there-without making payments-for several months if not a year or so. The thought of giving things up can't be easy. Honestly I can't really relate-never had anything to begin with, LOL. But whatever money you have in the bike is long gone. You'll never get it all back.

If you do nothing, and the creditors get judgements, in addition to putting a lien on your home, they may be able to garnish wages and empty your checking account. (Those things vary by state.) Another unfortunate side to waiting is that in time, you may be better off financially. But, with interest, fees, etc. the $47,000 may grow at more than $1000 per year, and it is likely not going away. Since you do have property & large balance accounts, it is very likely that you'll end up w/ a judgement. Even if nothing happens for a few years, that is a few years that you could have been rebuilding post BK.

[StaciMM]

PS-if you did get a steady income and do a 13, you'd need to pay at least $20,000 or so, plus trustee's fee and attorney's fee, because that is approx. how much the creditors would get if you filed a 7. (Equity on the house & harley.) Meaning your monthly payment would probably be in the $400-500 range.

[losing_it]

I have nowhere to go (like family or friends to stay with for free or a cheap rent) if I give up my place in BK. I would have to pay about $600 a month for rent which is equal to my mortgage payment. So if I didn't file and CC's put a lien on my place and I never sold it could I still manage to keep it? And for how long?

Once I finish my degree and hopefully get a good job within a year or two, I have no problem trying to pay them back. I'm not trying to get totally out of it. I want to pay my debts, I'm just in a real bad place jobwise right now.

[losing_it]

This brings up another question. With real estate prices having been ridiculously going up the past 5 years, what would the BK court use as a guide to what my place is worth? The taxes that I pay currently have it worth $70,000 and were readjusted about 2 or 3 years ago. The other units in my building are bigger and nicer than mine and have currently sold for between $110,000 and $125,000 but like I said they have more sq. footage. If theres a way I can prove my units worth isn't more than $5000 than what is currently owed then I should be able to keep my place right?

When I did the refi in 2003, it appraised for $125,000 but I know I can't get that much for it. Appraisers have been known to inflate prices and I knew that was happening but didn't say anything. Plus, back then, there weren't as many condos in the area that I live. Now they are popping up everywhere and the prices for them have started to come down because the new ones aren't pre-selling like the developers thought. We have too many on the market now so prices should steady or come down some right?

Would I get a chance to get a new appraissal?

[StaciMM]

The trustee will have someone go out and appraise it if he thinks you list a low value. Expect the trustee to be informed on market values, etc. He gets to keep a % of assets afterall.

You're between a rock & a hard place, as the saying goes. Giving up your non-exempt assets would not be worth what you'd gain by losing the debts, yet you need stable income for a 13 & partial repayment.

If you expect your situation to improve in a year or so, then doing nothing may be the best thing FOR NOW. In the meantime, if anyone gets a judgement-don't leave any money in the bank. If you get a job, don't use direct deposit. At that point, when you're working, if your income is enough to pay something but not all, perhaps that will be when you want to do a ch. 13.

[losing_it]

Ok, while reading other posts here, I just found this:

http://www.bankruptcyforum.com/t4030-bankruptcy-law-tightens-homestead-rules.html

And in that article it says "provisions affecting home ownership, which override state laws, went into effect in April when President Bush signed into law the federal Bankruptcy Abuse Prevention and Consumer Protection Act."

so this means whatever the state has listed as exempt which is $5000 in my case here in SC doesn't mean anything if I'm reading this correctly.


And here is something else: She paid $178,000 for her place and 2 1/2 yrs later, it has appraissed for $335,000.

The article then says "The revised bankruptcy law now restricts unlimited homestead exemptions to people who have lived in their primary residence for at least three years and four months. For people in their homes for less time than that, the law allows them to keep up to $125,000 of their home's value[END QUOTE FROM ARTICLE]



Ok, I've owned my place almost 9 years, so it would be ok if what this article says is true, and please let me know if I'm misreading this. My balance on the mortgage is $91,000. And I'm sure the most it would really sell for is around $110,000-$115,000 since condos haven't been increasing in my area that much lately. So I'm way under the "allowed" equity of $125,000 and this $125,000 only applies to home owners who have owned their property less than 3 years and 4 months.

So isn't my home safe from a trustee ordering it to be sold?

And what about a forced sell if one of my CC's gets a judgement against it if I decided not to file BK. Can they force me to sell? Sorry to keep asking questions. I just want to be sure of things. Thanks so much for your answers so far Staci.

[StaciMM]

I think you're misreading... The $125,000 cap applies to people who live in states w/ unlimited homestead exemptions, where they have been there less than 40 months (3 yrs, 4 mo). They can only use the unlimited if they've lived there longer. "Up to $125,000" is not the same as "$125,000". It states the maximum, not the minimum.

The example discussed is about a FL residence, and FL has an unlimited homestead exemption. SC does not.

Before, if you had a million dollars and a bunch of debt, you could buy a home in a state w/ unlimited homestead, and take up residence there. 91 days after moving in, you could file BK on all your debts and they'd be discharged-even though you had so much equity-because certain states allow unlimited homestead. The law was changed to prevent that sort of 'legal' abuse.

[losing_it]

Well, it does say "provisions affecting home ownership, which override state laws, went into effect in April when President Bush signed into law the federal Bankruptcy Abuse Prevention and Consumer Protection Act."

So what I gather from that is the state law is overriden. I read some more articles last night about people filing BK and choosing whether they wish to have their individual state provisions apply or if they want the federal provisions to apply. I think this is why people say to hire a BK lawyer because a person may overlook a detail like this trying to do it on their own.

I typed "homestead protection" in search engines last night and read more articles where people were saying your home cannot be taken away from you by creditors. An individuals homestead is protected and you are allowed $125,000 of equity that can't be touched. Now if I had a lot more equity in my place, then I would keep trying to get a HELOC and just settle with the CC's. I'll try to find a few links I bookmarked. Some of them have been written before the new laws went into effect but the homestead law that changed is actually beneficial to the homeowner.

Heres 1 link:

http://www.premack.com/columns/2003/2003-09-23.htm

And on this link, http://www.answers.com/topic/bankruptcy Go to a little past the middle of the page and it says what the new law is, or do a word search by hitting ' ctrl f ' and type "homestead" in the box and it will take you straight to that part of the page.

[QUOTE from this article]
(In 2005), the United States Congress enacted and President George W. Bush signed into law legislation that vastly changes the laws of bankruptcy as they pertain to individuals. This law will go into effect on October 17, 2005 and drastically change the historical American version of bankruptcy in that creditors will be treated much more favorably than debtors. Some of the more significant (and controversial) changes include:

-Limiting the homestead protection to $125,000 in equity and establishing a 40 month residency period before such protections are recognized in Bankruptcy.



and heres an interesting article from courttv website, its advice for collectors on sueing for the collection and it looks like it's very hard for them to collect. When you click the link, they ask what your zip code is, type it in and then it will show the article (i don't know why they do that). http://consumer.courttv.findlaw.com/...5851D923B.html

[losing_it]

The more I read last night, the more I realized what CC's and collection agencies can do and will try to do to get $$. Im going to be ok. I'll just let the CC's sell the debts and watch the CA try to collect. I have no bank account to levy, and 100% of wages in SC is protected from garnishment (like I'm really going to make a lot of money right now anyway). Even if they could garnish them, they can do no more than 25% and low income workers are protected.

I read where people had old debts - 5 to 7 or more years, and right before the statute of limitations was about to go into effect and make the time to collect on the debt "expire", collections would start sending notices to these people about suing and getting judgements. In some cases, the CA settled for 1/4 of what was owed. Now this is years later in the examples I read. So maybe it would be best if I put off BK for a while, see how my job situation changes over the next year or so and in the mean time, just save money (under my mattress of course) and when the debt gets old enough and they try to come after me, I should have something saved up to offer them a settlement, might not be much but it will be an offer. The only thing is my credit will be ruined during this time but it already is and I really don't care to have a good credit score anymore since I already own my place and plan to pay for future things with cash.

But then again, since up to $125,000 in equity in my homestead is protected, then maybe I should do Ch.7 BK since I would qualify right now. Then the debts will be discharged and I won't have to worry anymore. I'm never going to try for a loan or credit card ever again anyway. Only a car loan if my current one breaks down and I'm desparate for a replacement.

[StaciMM]

Speak to an attorney who does bankruptcy in your state. I don't want to sound negative, but you're latching on to something that will likely not pan out.

"Limited to $125,000" pertains to states which allow more than $125,000. Changing from $5k to $125k is not 'limiting'. That part of the law pertains to the 4 states that have unlimited homestead exemptions, not to the 46 that have more restrictive guidelines.

Protecting 'up to $125,000' means you can't get more exempted, it doesn't mean you can exempt $125,000.

[losing_it]

Yep just found another article, and this clears it up a little more:

http://www.nolo.com/product.cfm/objectID/F87C0B36-D2FB-4FE2-801B76AD0792C01A/catID/462A9501-9B21-4E09-A08C5A7B8AF51A79/update/1/213/161/#update_3526F456-6733-49FA-96780FD054379B01

So if I've been in my state more than 40 months, then my state exemption applies, the $5,000 in my case. But thats if I file BK and the trustee decides to take my property and sell it. If I don't file BK, then this won't happen and I can keep my place. The CC's biggest weapon is compounding interest. The amount I owe them will sit and grow big time. But they cannot take my home. CC's and CA's cannot force me to sell my home in order to get money from me. They can levy bank accounts (I don't have one now) and if they win a judgement, and this differs from state to state, they can garnish wages (but my state, SC, has 100% protection from wage garnishment.) They can put a lien on my place but can't collect until I sell it. What if I never sell? And I'm sure over a 5-10 year period, I can make and save enough money to offer them and have the lien removed. If I never sell it, they won't get anything anyway.

[losing_it]

Ok, found more on this, and look closely at the bottom part in BOLD:

http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=24&suppressall=y

Judgment Liens and Enforcement of The Judgment Against Real Estate
By law, an unpaid judgment can become a lien on real estate in Illinois owned by the judgment debtor (the consumer). A judgment lien is a claim belonging to the judgment creditor and giving the creditor the right, under certain circumstances, to have the property sold in order to get payment on the judgment. In order to get this lien, the judgment creditor must file certain papers in the county recorder's office. Creditors with a judgment lien can force the sale of the property that has a lien on it. Even without filing for the lien, however, a judgment creditor may still ask the court to have the property sold by the Sheriff to get paid on the judgment.

Luckily for the judgment debtor, however, there is something called a "homestead exemption" which makes it very difficult to sell the residence of the judgment debtor (see below). Also, if the real estate is sold, the judgment debtor has certain rights to pay money to get the property back.

The Effect of the Lien
A judgment creditor with a lien may be able to force a sale of your property and use the proceeds to pay off his judgment, even if you owe other creditors money, too. Even if the creditor cannot force a sale, because the real estate is exempt or for other reasons, state law permits the lien to remain in effect for 7 years from the time it is entered or revived (an old judgment can be extended or "revived"). For that period of time, the lien will "cloud the title" of your real estate because, if you want to sell the real estate, the judgment will have to be paid first.

The Homestead Exemption
In Illinois, an individual who occupies the real estate as a residence is entitled to a homestead exemption. The home cannot be sold to satisfy the lien if the amount of your equity interest in the home is less than the exemption amount.

The value amount of the exemption is $7,500 for a single person, and $15,000 for a married couple who both own the residence. This must be compared to the debtor's equity interest in the property. A debtor's equity interest in real estate is figured by subtracting amounts owed on a mortgage or other loans secured by the home from the present value of the property. If the the equity interest is less than the exemption, there cannot be a forced sale of the house to satisfy the lien.

For example, if a home is worth $85,000, but the sum of $75,000 is owed on the mortgage, the debtor's equity interest is $10,000. If the debtor is married, and both spouses own and live in the residence, their entire interest is protected by their $15,000 exemption. Since the debtor's equity interest in the real estate is entirely protected by (i.e., less than) the exemption, the home is exempt from sale by a judgment creditor.

However, if the amount of the equity interest is greater than the exemption amount, then the home might possibly be sold. If there is a forced sale, before the creditor could realize any money from the proceeds, the mortgage holder would have to be paid and the debtor would receive the amount of the homestead exemption. This means the creditor actually has to pay $7,500 (or $15,000) in cash to a debtor who has avoided payment of the judgment. Many creditors do not go the effort needed to force a sale for this reason.

There are other reasons why a creditor might not want to try to force a sale even if the amount of debtor's equity interest in the real estate is greater than the exemption amount. The creditor must consider the additional costs he must pay such as advertising costs, a lien search, and the evaluation and appraisal of the property. There are additional steps and costs that the creditor must take both before and after the sale. Other costs include the cost of a certified copy of the judgment (which must be given to the Sheriff), a title report, recording charges, publication expenses, and the Sheriff's commission for conducting the sale.

It does not make sense for the creditor to force a sale of your home if the fair market value of the real estate is not substantially greater than the creditor's costs. Those costs include all of the above costs, together with the payment of the homestead exemption and all prior mortgages and liens. In addition, the complications arising from the homestead exemption and redemption rights will make this type of sale not very appealing to potential bidders.

For these reasons, a creditor usually will not find a forced sale of real estate worth the additional time and effort and cost involved. In most situations, the creditor is likely to look for a different method of collection.

[losing_it]

I've been with these CC for years, so they have made money off of me for a long time. In cases like mine (long time CC holder) if most CC's usually settle for 1/4 to 1/2 of what is actually owed, then 3 of my accounts ($2,500-$11,000-and $12,500) may view my home as not worth going after since they would have to pay off my mortgage first, then pay me $5000, and then apply any $ made after that to their own fees and the original debt. They would pay out essentially what they would settle for and possibly make a few thousand extra dollars or maybe not according to fees and court costs and what my place would sell for on auction, and auctioneers only want a good deal, my place might not even get a bid of $110,000. If I were in the CC's shoes, I just wouldn't persue it because it may cost more than what they will eventually get.

Now the other card with almost a $22,000 balance might look at this more serious. If, a big "if" they can win a judgement against me before anyone else does and lets say hypothetically the other cards don't sue me, and this CC gets the majority of my equity from sell, he may collect about $10,000 after its over and done, which is less than half of what I owe on the card.

But all 3 CC companies (Im not counting the $2,500) could be essentially battling for $15,000 of my equity, and this is assuming my place would sell for $110,000 and after they pay me my $5000 homestead exemption. I would think its not worth the money and battle, but thats just me. I could try to work an agreement on the $22,000 card and start sending them monthly payments of what I can afford in order to prevent court action by them. I feel that one card would probably be the only one that would think about enforcing a sell to satisfy judgement.

[FoolAndHisMoney]

Yeah Staci's correct. The 125k cap is only for debtors moving to one of the several states with generous homestead exemptions. You have a $5000 allowed homestead exemption. If you have 20k equity and can get another refi (even with slightly higher payments) you can legally exempt this money by replacing old furniture and probably the roof. You can probably take your older car and get new tires and rebuild the engine and tranny so even though it will have a low book value (based on kbb) it will still last you a while. You would need an income to support the monthly payments though.

Good luck!