What happens to the rental property?

[chelan10]

Hi all - My husband has a rental property and he break even on the mortgage and rent payments but there is some equity on that house. I'd like to know if this will be a problem when we file bankruptcy?

We won't be keeping our primary residence and it's a 80/20 loan.

Thank you in advance!

[newbie2]

You'll have to look up Washington States exemptions and see if there is some kind of "wild card" that can be used to exempt the equity. (Since the home is an investment property and not your primary homestead, the normal "homestead" exemption wouldn't apply.)

[chelan10]

Thank you!

This is what I found for WA:
Wild Card
$2000 of any personal property (no more than $200 in cash, bank deposits, bonds, stocks & securities)
6.15.010(3) (b)


How is the equity determined? Will someone be doing some sort of appraisal? The exact townhome right across from the rental property is a shortsale, and the price has dropped from 279k to 225k.

[backtoschool]

It will be difficult to exempt equity in a rental house in a chapter 7 bk. You will need a wildcard for that, and only certain states and federal exemptions allow the unused portion of the homestead exemption to be used for other assets. If you can file federal exemptions you should be able to protect part of the equity using part of your unused homestead exemption.

You will need to put the rental income on your schedules as income as well.

[AngelinaCat]

Here is a link to a site listing the Exemptions for Washington State. You can use the Federal Exemptions instead of the state's if you wish. You cannot mix and match, though. It has to be one or the other.

http://www.bankruptcyinformation.com/wa_exemp.htm

The way the state exemption is worded, you may be able to claim the rental if you can prove that you intend to use it as your primary residence. You will have to file for Homestead on it.

[chelan10]

Thank you all!

Is this the amount $17,450 to what you just said above, Angelina?

Homestead
Real property, including co-op or mobile home, to $17,450; unused portion of homestead to $8,725 may be applied to any property

We were thinking of renting an apartment since we received a Notice of Default on our primary last month. We're expecting our first baby in February so I'd like to find a place to settle down and don't have to worry about rushing out of our primary when it's foreclosed. The attorney also suggested us to wait until February to file because the extra household member would put us under the means test.

[AngelinaCatHub]

Thank you all!

Is this the amount $17,450 to what you just said above, Angelina?

Homestead
Real property, including co-op or mobile home, to $17,450; unused portion of homestead to $8,725 may be applied to any property

We were thinking of renting an apartment since we received a Notice of Default on our primary last month. We're expecting our first baby in February so I'd like to find a place to settle down and don't have to worry about rushing out of our primary when it's foreclosed. The attorney also suggested us to wait until February to file because the extra household member would put us under the means test.

Sounds like you have a good lawyer. I wish you good fortune on your 'new start' and new baby. 'Hub

[AngelinaCat]

Thank you all!

Is this the amount $17,450 to what you just said above, Angelina?

Homestead
Real property, including co-op or mobile home, to $17,450; unused portion of homestead to $8,725 may be applied to any property

That is the way I understood it. Also there is wording to the effect that the exemption can be applied to a piece of unimproved property, provided you intend to use it as your primary residence. That is why you have to apply for the Homestead.

Congratulations on the new baby. I don't blame you for wanting to rent and have yourselves situated for when this blessed event happens.

Good luck to you !

[chelan10]

Thank you 'Hub!! I'm very excited about the baby and I wish I was in a better situation .... but just gotta deal with it now. I hope I have a good lawyer! I just emailed the attorney so hopefully I'll hear from him soon. I'll keep my case posted.

[tcreegan]

Hi chelan,

Maybe I can sweeten the pot a little...I think federal exemptions have a $925 wildcard which can be used on top of the unused homestead exemption. $1850 if filing jointly....

Good luck to you,

Tom in Colo

[chelan10]

Thank you Tom.

I'm meeting with the attorney this Friday and he said I might have to file early if the trustee sale is before February (something like that). I'll get more info this Fri and will post it up.

[chelan10]

Per the attorney, I will have to take back the rental and use it as my primary residence to protect it since there's equity, and will let the primary go into foreclosure. I also have a furniture credit card and the promotion no interest/no payment ends on January 1st, 2011 and attorney advised me not to make payments, and I don't mind giving it back either. I only use one credit card and I will continue to make payments (monthly auto draft payments), and would like to keep it if the creditor doesn't close it. Once the baby comes in February, the additional member and the mortgage payment for the rental that we will be taking back, will put us under the means test and we will proceed with chapter 7. The big debt that I have is the 2nd lender on my current primary residence. I tried to settle with them but it didn't get anywhere.

Please let me know if you have any questions/inputs. Thanks everyone!

[backtoschool]

Most likely you will not be able to keep the credit card. It is highly likely that your creditor will close it once you file bankruptcy. Making the payments will be putting money towards a card that has a high likelihood of closing. You should not charge anything on any card 90 days before filing.

[chelan10]

Thanks for the info backtoschool! Do you think I should stop making payments and putting charges on that card right now?