Can I keep my home?

[csepres]

30 years ago I purchased my home(NY) and today it is worth about $850,000(approx. 150,000 in equity). My business was good and then recently failed. I have enough from my disability pension and social security to pay the home mortgage but my other debts I can no longer manage so I filed a Chapter 13. My annual income from consulting work is 50,000. My current monthly expenses are more than double my consulting income. The large mortgage is the majority of my expenses but, again, this is covered by my pensions.

I submitted my Ch13 plan but the court rejected it saying that I live in a large house, I have a huge mortgage and I should sell the house and get a smaller mortgage so that I could contribute more to the plan. ( note: my Ch13 plan proposed paying off all the secured creditors with the sale of another piece of property and paying the unsecured $200 per month for 5 years.)

My attorney and I are meeting soon to decide if I should appeal the decision, convert to a chapter 7, sell my house, etc. Since housing values are lower there is no assurance that I can get even 850,000 for the house or that the house will sell in any reasonable timeframe. Even if I sell the house and get a smaller mortgage, there may not be enough left over to make a significant difference in what I could afford to pay through the plan. I would like to keep the house since I can pay for it with my disability pension and social security.

Can the court force me to sell the house on the possibility that I could pay more?

It appears that the court is including my pensions(which provides the ability to maintian a large mortgage) in their decision even though those monies are exempt.

Isn't the court actually altering the means test by considering the expenses my pensions support?

Shouldn't the court remove the home mortgage from the expenses because it is covered by pensions and only consider the remaining expenses against the 50,000 consulting income?

Is there any case law which talks about similar situations?

Thank you in advance for your time and insight.

[lrprn]

Welcome to BK Forum, csepres - glad you found us!

30 years ago I purchased my home(NY) and today it is worth about $850,000(approx. 150,000 in equity).

The problem here is not whether you can afford the house payment - it's your huge amount of home equity. NY only allows a $10,000 equity exemption on your homestead - with $150K equity you have many times the maximum that can be protected. I can't understand why your lawyer would encourage you to file Ch 13 with this much equity knowing you couldn't protect your home with the exemptions allowed in your state. Is your lawyer a bankruptcy specialist?

[csepres]

The attorney I am using has numerous bankruptcy cases so I assume that he is a bankruptcy specialist. Also, the attorney stated that the trustee is not mentioning the equity in the house. The trustee is harping on the fact that I am paying a huge mortgage and they want me to move to cheaper quarters in order to free up money to be used to pay down debts.

[SinkingFast]

Since NY only allows for $10K in Homestead Exemption, and you have $150K in equity, then,............. From the Court's perspective, you can pay back $140K.

Creditors have to be paid thru Ch 13 what they would get if you filed Ch 7. If you filed Ch 7, the Trustee would seize and sell your house, pay you your Homestead Exemption, and distribute the remaining proceeds to your Creditors.

You submitted a proposed Plan to pay back $12,000 which is well short of the prospective $140K the Court could get from selling your home.

Just curious, but,.......... How much debt are we talking here?? And what types of debt?? Secured, Unsecured, Priority??

Also, regarding Pensions and SSI income, HHM recently explained the BK Court's point of view on these types of incomes:

http://bkforum.com/showthread.php?t=14917

Post #7 of that thread.

Just because you receive "Exempt" income does not necessarily "Exempt" that income from being considered when calculating a Repayment Plan for Ch 13.

[csepres]

I owe about 125,000 on a second mortgage on my house. I have a 600,000 first mortgage. I have about 150,000 in credit card and business loan debt that I personally signed for. I also have an IRS tax lien of 85,000 against my house and the property I'm selling.

I am selling a piece of property to cover the IRS and 25,000 of the secured debt against my house. I have a signed contract on this piece of property. After this sale I will owe my first mortgage, 100,000 on the second and unsecured debt of 150,000.

After this transaction, is it permitted in BK to arrange to make monthly payments on the second mortgage leaving only the unsecured debt of 150,000 to deal with?

[csepres]

Regarding the homestead exemption I discovered it was increased in NY in August,2005 to 50,000 per person or 100,000 per married couple.

http://www.hamptons.com/hamptons_article_long_island_1112.htm

[lrprn]

Yes, you're right. Checked another bankruptcy exemptions site http://www.bankruptcyaction.com/nyexemptions.htm and the NY homestead exemption is now up to $50,000 ($100,000 for a married couple).

If you are married, you are still over what is allowed in NY by $50,000. That's more than enough money for any trustee to go after for your creditors.

[lrprn]

I am selling a piece of property to cover the IRS and 25,000 of the secured debt against my house. I have a signed contract on this piece of property.

I'm confused. When you file bankruptcy, the trustee controls all your assets until your Ch 13 case is closed. When non-exempt assets like property are sold, the trustee arranges for the sale and then pays your creditors with the proceeds in a very specific order until all the creditors who filed claims are paid in full or you've made your assigned monthly payment for the 36 or 60 months of the plan.

You mentioned that your plan was not confirmed. Has your Ch 13 been officially dismissed or are you in the 45 day period to file an amended claim? If your case is still active, did your lawyer get permission from your trustee to sell the property? Was the contract signed before or after you filed? Who decided which of your creditors will get the proceeds?

After this transaction, is it permitted in BK to arrange to make monthly payments on the second mortgage leaving only the unsecured debt of 150,000 to deal with?

Again I'm confused. When you file Ch 13, ALL of your secured and unsecured debt is included in the plan. Mortgage and car payments can be paid by your trustee "inside" the plan or you can pay the payments "outside" the plan yourself.

Whether it's better in your situation for your trustee to pay your second mortgage inside your plan or for you to pay it outside your plan is a decision best made with your lawyer.

As far as how much of the $150K of unsecured debt will actually need to be paid back, that depends on how many of your creditors file claims to be paid back through your plan by the deadline after your filing date.

[csepres]

Yes the plan has been officially dismissed. I am in the 45 day period. The lawyer did get permission from the trustee to sell the property. I received a binder this week and the contract is in the works now. My lawyer and the trustee indicates the IRS is ahead of everyone.

Now that my plan is dismissed my lawyer set up a meeting to discuss the next step. Briefly he mentioned an appeal is possible. I assume I can file a new plan. He would not go into details until we meet on July 9th. Any suggested course of action?