Investment properties

[HOMEBODY]

I owe 348,000 in equity lines of credit on 3 houses

The one I live in is $100,000 upside down. House is worth about $650,000.00
$745,000 first
80 2nd

One rental the equity is about $100,000 - house is worth about $400,000.00

$180,000 First
245,000 Equity line of credit

2nd rental is about even or probably $20,000 below what I owe.
$160,000.00
20,000.00 equity


Would the BK court consider the upside down on my principal property to allow me to keep the 1st rental property that is up by about $150,000?. If they eliminate the equity line of credit that would mean I am up in equity on that property by about $220,000.00. Would they allow me to have $220,000.00 in equity on one property and take into consideration the main residence that is upside down?

The payments are up to date, but have lost tenants and have used credit cards to keep up and maintain the houses.

Thanks everyone.

[HHM]

Would the BK court consider the upside down on my principal property to allow me to keep the 1st rental property that is up by about $150,000?. If they eliminate the equity line of credit that would mean I am up in equity on that property by about $220,000.00. Would they allow me to have $220,000.00 in equity on one property and take into consideration the main residence that is upside down?

Nope, doesn't work that way. If you were to file a chapter 7 bankruptcy, the trustee would be allowed to sell your positive equity rental property and use those funds to pay your unsecured creditors.

[justbroke]

Would the BK court consider the upside down on my principal property to allow me to keep the 1st rental property that is up by about $150,000?.

No. It is not your homestead (primary residence) so it doesn't enjoy the homestead exemption!

If they eliminate the equity line of credit that would mean I am up in equity on that property by about $220,000.00. Would they allow me to have $220,000.00 in equity on one property and take into consideration the main residence that is upside down?

I don't even know what you mean by eliminate the equity line (HELOC). You're thinking you can lien strip in a Chapter 7? Not going to happen.

The payments are up to date, but have lost tenants and have used credit cards to keep up and maintain the houses.

This will be the death of you (financially) and your good credit. I did the same exact thing. I used high limit credit cards to stay afloat while my investment property remained vacant. It did nothing but pull me deeper into a hole.

You need to seriously start your pre-bankruptcy planning and get with a few attorneys. Your should be planning your exit strategy. You may want to make the rental with the equity, your primary residence (by actually moving into it and intending to keep it as your residence). Depending on your State, you may enjoy significant homestead exemptions protecting a lot of that $100K.

My suggestion to you is to immediately plan what you want to do (keep properties or not) and consult with a few attorneys. You need to stop using those credit cards! I have over $150K in credit card debt trying to keep my properties. Yeah, it happens quickly!

[HOMEBODY]

Just got the property bill on the rental and the $357,000.00 and I owe $428,000 between the first and the equity line of credit. There is a difference of $71,000. What would happen in this scenario?

Can the equity line be negotiated to the $71,000 from the $248,500 that I owe on the equity so I dont lose the property?

[justbroke]

Can the equity line be negotiated to the $71,000 from the $248,500 that I owe on the equity so I dont lose the property?

Anything is possible, but I don't think anyone on this Forum would tell you with any certainty that you can negotiate. Sometimes, it's better for the 2nd to charge-off the amount and sell the debt for pennies on the dollar rather than deal with it any longer.

Why are you trying to keep the investment property? It enjoys no special status (homestead). I have been in a similar position. The only thing you could do -- if it's even possible -- is to move into the investment property and make a homestead declaration. Other than that, I don't see any of this working in your favor.

Also, a property (tax) bill is not indicative of what the market value of a property is in actuality. I would get a comparative market analysis (CMA) from a Realtor or some sort of appraisal (electronic or actual).

Okay, so you confused me on the 1st rental property. You are actually upside down on that property. A HELOC is a secured loan and, as such, enjoys the same privileges as any other lien when it comes to foreclosure. So you don't have any equity in this property at all. I don't know why you're trying to save it because you already upside down on it.

I'll keep repeating myself... what's your end-game? I'm thinking you're trying to save something that is, perhaps, not worth saving! It reads as if it's already upside down. If it were your primary residence (homestead) and you were no more than 10% underwater, I might suggest fighting to keep it. However, you're talking about an investment property that is underwater by (perhaps) a considerable amount.

[HOMEBODY]

So yes..I am upside down on this property I guess. But I have a good tenant there paying the rent...It I can only get the 2nd to go away or negotiated..its what is killing me financially. I could hold the property until things get better in the real estate market. I bought that house 20 years ago and when I moved to my present home took a 2nd to pay for this one. I would like to keep it as investment for my retirement.

I am upside down..but if the 2nd goes ago away..I will have equity then..Dont know how that works.

Thanks for your advise.

[HOMEBODY]

Another question...how long before filing filing do you stop using your credit cards? I am planning to file in March..but if I can do it sooner the better. I have been using my credit cards till now.

[justbroke]

If you're filing in March, it's probably safe to stop paying credit cards in December, but there are many caveats that come with it. While I'm not an attorney, and certainly not your attorney, there are other factors in determining when to stop paying. Generally speaking, you don't want to use the cards within 90 days of filing anyhow! This can cause issues with dischargeability. Second, if you took large cash advances, you may have dischargeability issues as well. If you've taken significant cash advances totaling over $2-3K from any single creditor... then you really need to be talking to an attorney to make sure you do the right thing. This could mean continuing to pay those specific cards until filing or at least to have made "some" payments to show that you intended to pay them back.

I'm thinking that you have as much in CC debt as I did, as I tried to save my rentals... I spent about $100K in two years.

[HOMEBODY]

Thanks JustBroke...

So tell me what did you do and what is your situation now?

I was thinking of using my cards to pay my property tax bill in Dec.. I guess I can pay it this month then right after I speak to the attorney. I cannot afford to pay the property tax bill at all.

So does anyone think that if the house is worth $357,000 and I owe $427,000.00 how does that look for BK...will I have to give up my house?
Once they discharge equity line...then I will have equity on the property..Right now I dont. Will they allow me to have equity on the properties when its all done?

Thanks

[HHM]

Thanks JustBroke...

So tell me what did you do and what is your situation now?

I was thinking of using my cards to pay my property tax bill in Dec.. I guess I can pay it this month then right after I speak to the attorney. I cannot afford to pay the property tax bill at all.

So does anyone think that if the house is worth $357,000 and I owe $427,000.00 how does that look for BK...will I have to give up my house?
Once they discharge equity line...then I will have equity on the property..Right now I dont. Will they allow me to have equity on the properties when its all done?

Thanks

Homebody

I don't think you are still quite grasping this...

1. Depending on the size of the Property tax bill, if you use a CC to pay it now, and file in March, there is still a significant risk of an objection by that CC company (I would guess that if the charge is $4,000 or more, the CC company would at least assign the account to an attorney to review the possibility of an objection to discharge.)

2. The bankruptcy court does not care about negative equity, so in that respect, you can keep the house so long as you can make the mortgage payments.

3. As for the HELOC, the HELOC is a secured debt. As such, it maintains it security interest after BK, so you WILL NOT HAVE EQUITY after the loan is discharged (unless your file a chapter 13 and do a lien strip). When you take out any sort of secured loan (HELOC, car loan, etc), you create two types of liability (1) the security interest, and (2) your personal guarantee of the debt. Bankruptcy ONLY discharges your personal guarantee on a secured loan, but NOT the security interest. Thus, the property will emerge from bankruptcy encumbered by both the 1st mortgage and HELOC.

[justbroke]

So tell me what did you do and what is your situation now?

I have no more rental properties. I kept my primary residence.

I was thinking of using my cards to pay my property tax bill in Dec.. I guess I can pay it this month then right after I speak to the attorney. I cannot afford to pay the property tax bill at all.

As already stated, don't even think of doing this. Property Taxes are non-dischargeble. Therefore, the credit card company can file a complaint (to determine dischargeability) and actually make it so that you can't discharge that credit card charge!

So does anyone think that if the house is worth $357,000 and I owe $427,000.00 how does that look for BK...will I have to give up my house?

You do not need to give up the house. It's your decision on whether to keep it or not.

Once they discharge equity line...then I will have equity on the property..Right now I dont. Will they allow me to have equity on the properties when its all done?

This will only work in the Chapter 13 context with a lien strip. Please read HHM's most excellent posting on this is in general. HHM also has a sticky thread on lien stripping as well, should you consider a Chapter 13.

[HOMEBODY]

Thanks JUSTBROKE.

I have had some friends file for BK and they have been able to get rid of their equity line of credit completely. So I dont know...I will ask the attorney why that is.

I think I am going to wait until May now..only because I have to buy a bond for my business and they always run a credit check and I have to have scores over 700 to get this bond. The only problem I will have is that the property will keep going up...so I will have to think about that.

I've just thought about filing BK a couple of days ago..so still in the planning process and see what I can do. Now if the attorney says that I cant get rid of those equity lines...then I have to think about this.

I will see that other post you suggested.

Thanks

[HHM]

Thanks JUSTBROKE.

I have had some friends file for BK and they have been able to get rid of their equity line of credit completely. So I dont know...I will ask the attorney why that is.

I think I am going to wait until May now..only because I have to buy a bond for my business and they always run a credit check and I have to have scores over 700 to get this bond. The only problem I will have is that the property will keep going up...so I will have to think about that.

I've just thought about filing BK a couple of days ago..so still in the planning process and see what I can do. Now if the attorney says that I cant get rid of those equity lines...then I have to think about this.

I will see that other post you suggested.

Thanks

See this thread on how Chapter 13's get rid of second mortgages. http://www.bkforum.com/showthread.php?t=31579
See this blog post about how you get rid of second mortgages "AFTER" filing chapter 7 Bankruptcy. http://askmethner.com/?p=450

There are NO other ways around this under the current BK law.

[HOMEBODY]

Thanks HHM for the info.

Based on the information I wrote on my initial thread about my financial situation.. In your opinion, how will I end up in a Chapter 13?