Can I keep a rental property in a BK 13?

[mattfro]

Under Colorado BK13 law, I have condo that I would walk away from, but I have a townhouse in my name that my brother lives in. Can I keep this townhouse without having to move in and making it my residence?

Would I be able to keep it under a BK7 if I get through the means test?

ANY input would be appreciated!

Thanks- Matt

[HHM]

Yes under some conditions (most likely).

1. You should be collecting rent from your bro and that rent money is considered income. (but it is offset by the mortgage payment, presumably).
2. So long as your plan pays the equivalent of any equity in the condo.

Keep in mind, the point of a chapter 13 is to allow you to KEEP assets.

[mattfro]

Yes under some conditions (most likely).

1. You should be collecting rent from your bro and that rent money is considered income. (but it is offset by the mortgage payment, presumably).
2. So long as your plan pays the equivalent of any equity in the condo.

Keep in mind, the point of a chapter 13 is to allow you to KEEP assets.

Thanks HHM... I have about $40-45K in equity in the townhouse. I collect $1100 a month from my brother and his roomy. That's a monthly break even point for me on the mtg & utilities.

I don't get how I pay the equity in a BK 13? No one will give me a loan against it.

[justbroke]

I'm in this same exact picture, with family renters that I've just sent a Notice to Vacate.

The rental property must generate income. This is a known flag for smart Trustees. They will not let you have a negative cash flow on a Rental/Investment, unless you're paying back the unsecured creditors 100%

I don't get how I pay the equity in a BK 13? No one will give me a loan against it.

Chapter 13 is all about paying your creditors in full. If you can't, then the Bankruptcy Code (and Court) allows you to pay less, but you must pay at least as much as the Creditors would have received if you were in a Chapter 7.

In other words, the Creditors must get as much money they would have received if you were to liquidate all your non-exempt assets (your Townhouse is non-exempt).

Let's break it down. Let's say that the only non-exempt asset you have is the investment property (the rental). It has $40K of equity.

Let's say that your Chapter 13 plan pays back 10% to unsecured creditors and they will receive $24K (about $400 a month) in a 60-month plan. if that's the case, the Trustee will not approve your Plan, as it's in bad faith.

[mattfro]

Thanks JB... I have about $60K in a debt settlement plan that is going down the tubes, $10K in a judgment that I pay $311 to Discover over 3 years, and I have another $10-13K in cards that I use right now. I'm also $10K upside down on a car that I've had a little over two years, but I'd like to keep it as it's an '06 and I doubt I'll get anything decent after a BK.

Can I go BK13 right now or do I have to stop using the cards like in a 7?

I was hoping to get by with $800-1000 a month for 5 years, walk away from my condo and go rent, and keep the townhouse my brother lives in.

I can show it as a profit on paper if that's what it takes. It's only a loss of about $100 a month now so I will hike the rent.

[justbroke]

Can I go BK13 right now or do I have to stop using the cards like in a 7?

If you've been in a debt repayment plan for a couple of years already, I don't see why not. The question would be, what are you trying to protect... the Townhouse?

I was hoping to get by with $800-1000 a month for 5 years, walk away from my condo and go rent, and keep the townhouse my brother lives in.

Get by, you mean the payments to your Creditors, through the Debt Repayment Plan, is $800-$1,000 a month? Or, did you mean that's all you have left for living expenses?

I can show it as a profit on paper if that's what it takes. It's only a loss of about $100 a month now so I will hike the rent.

That's why I'm kicking out my brother. He can't afford the new rent.

Oh, and on the car. What's the EXACT amount of time. You're almost at the MAGIC 2.5 years (910 days)!!!

[HHM]

You would have to stop using your credit cards in either chapter of BK.

What is meant by "pay the equity" in a chapter 13 is that, over the 5 year plan, the total amount you pay must "at least" equal the total amount of equity in all your assets.

So in your case, if you ahve $40K equity in that condo, your "minimum" payment would probably be around $725 (factoring in attorney's fees and interest). But at the same time, you must devote "all" your disposible income to the chapter 13 plan. In a situation where a person has "too much" equity, but not enough disposible income to pay that equity over 60 months, the chapter 13 is dismissed.

[mattfro]

Thanks guys.... I just scheduled a consultation for next Thurs. I can swing a payment of about $1000 to the Trustee. I just cannot give my brother the boot, so I MUST keep that townhouse.

[ThreadsSnapping]

Thanks HHM... I have about $40-45K in equity in the townhouse. I collect $1100 a month from my brother and his roomy. That's a monthly break even point for me on the mtg & utilities.

I don't get how I pay the equity in a BK 13? No one will give me a loan against it.

Do you really have the $40K in equity in the townhouse? Just asking with how the market is right now it may sell for a lot less than you think. May want to try calling a few good real estate agents and getting them to price it out for you. You may have less equity than you think and you would also have to take out any fees to sell it and see what you have left over. Might only be a few grand.

And as for how to pay the equity in a bk 13, it just means that you would have to pay your creditors back at least as much as the equity in your house.

TS

[justbroke]

Hats off to HHM for being so thorough, he even provides the approximate minimum payment amount!

[mattfro]

No doubt, huh?!

[mattfro]

Do you really have the $40K in equity in the townhouse? Just asking with how the market is right now it may sell for a lot less than you think. May want to try calling a few good real estate agents and getting them to price it out for you. You may have less equity than you think and you would also have to take out any fees to sell it and see what you have left over. Might only be a few grand.

And as for how to pay the equity in a bk 13, it just means that you would have to pay your creditors back at least as much as the equity in your house.

TS

Yeah, that's conservative...