Are we allowed?

[athomas]

Long story short, DH took a new job in an adjoining state about two years ago, just shy of three years into our Chapter 13 plan under old law. We've literally been beating our heads against the wall trying to figure out how we can sell our home. In this market, every option presented by our atty has been either cost or time prohibitive, so we have decided to wait until we're done with our plan later this fall...that was until I found out it could take up to a year for the accounting of our plan and discharge. we first sat down with our atty to discuss options a year and a half ago, which means it will at this point be three years before we can even list our home. We certainly don't have the means to pay for an appraisal, etc. at this point, along with filing the motion to gain permission to sell and then waiting for months for an offer to be approved. We currently live in the home, with DH making a monster commute daily and staying with friends and co workers when needed. Certainly not a great plan with three kids at home!

Recently I was made aware of a rental opportunity in the state where my husband works. We have crunched all the numbers, and if we found a renter for our current home we could more than handle it and keep our home until the market rebounds or we're able to sell without jumping through all these hoops. I am aware that we would need to cover all our bases, but the biggest question is...are we legally allowed to do this? Anyone have experience with this situation? Have I finally found the answer to my problem, or is this yet another cruel joke?

I plan to email my atty, but I don't have his email address with me at work and there was no answer at the office. Anyone have any reassurance for me?

[bearcat]

Please keep us posted as to what your attorney says. I am going to be in the same boat soon and was considering the same thing you are.

[lrprn]

Recently I was made aware of a rental opportunity in the state where my husband works. We have crunched all the numbers, and if we found a renter for our current home we could more than handle it and keep our home until the market rebounds or we're able to sell without jumping through all these hoops. I am aware that we would need to cover all our bases, but the biggest question is...are we legally allowed to do this? Anyone have experience with this situation? Have I finally found the answer to my problem, or is this yet another cruel joke?

First, I'm sorry to hear about all your problems trying to sell your home.

There are three potential issues you could have by renting your home - two are with your Ch 13 plan, and one is with your house.

Issue 1 - Since your home is an asset of your bankruptcy plan, your trustee has to give permission to rent the home out before you can do so. This opens the door to Issue 2.

Issue 2 - Rental income from your home will be counted as income. The new apartment rental will be counted as an expense. If there is a considerable difference between the two, that increases your disposable income, and therefore could potentially increase your plan payment accordingly.

Issue 3 - Renting your home to strangers when you aren't living close by could end up a nightmare. I don't know what kind of homeowner's insurance you have currently, but you could see a considerable increase in your premiums once you open your home for rental. Also there's the ever-present possibility that your renters will (a) damage your home; (b) break their lease prematurely so you have no rent coming in to pay your mortgage, and/or (c) finish their lease and decide not to resign. There's a real risk in any of these situations that you won't have the cash to pay your homeowner's deductible to fix damage to the home, or because you lose the rental income, you won't be able to pay your mortgage on time which opens the door to losing the house to foreclosre when your lender asks the court to lift your stay. All of these put your house at considerable risk.

I understand you wanting to bring your family together - a very important aspect of your family life. However, you need to balance this against the real possibility of losing your home because you would prefer to not continue your current situation until the end of your plan.

And by the way, the average time for a Ch 13 trustee to complete the audit and discharge you is typically only 3-4 months - not a year. Some of our members have received their discharge in as little as a month. A few have taken longer. It all depends on how efficient your trustee is, how much of a caseload he/she is carrying at the time, and how willing your attorney is to push the issue.

You've made it this far. I hate for you to open up a situation that could cause you to lose the home you've tried so hard to keep for the last four years.

Sit down with your husband and talk this over in a cold, unemotional way. Think about what you would advise a friend to do if she was in the same situation. Accept that you could be placing your home in jeopardy by trying to rent it out before the end of your plan, and is the payback worth it if your house is the price to make it happen.

Discuss this thoroughly with your lawyer and see what he/she says the true risk might be.

Please keep us posted as you move through deciding what to do, and post any more questions that come up along the way. Hang in there! We'll help you sort things out as best we can.