Chapter 13 or home equity loan?

[rrami64]

My dad is 79 years old. Has partime job with social security. Only owes 15K on his home which is worth 145,000. Just found out he is maxed out on his credit cards.......$45,000 worth of debt. He is not able to make the minimum payments on them now. Would it be better to file chp 13 instead of refinancing his home? He is scared and does not know what to do. Please help me.
His Son.

[zeezee]

Maybe bk is not even the route he should go. Have you checked into a reverse mortgage? Given his age and the equity in the home perhaps he will qualify for that.

[woeisme]

I thought you had to totally own the home to do a reverse mortgage?

What state are you in? How much equity can be protected varies from state to state, and in some states he'd be able to completely exempt his home, possibly allowing him a CH 7 instead of CH 13.

I'd hate to see him turn unsecured debt into secured debt, and possibly losing his home in the process if he can't make the HELOC payments. But would need a lot more info like state exemptions, total income, etc, before being able to make a recommendation.

[zeezee]

I think you do have to own it but I figured with him only owing such a small amount, he may be able to get someone to work with him. Never hurts to ask!

[zeezee]

I found this on www.reversemortgage.org

What If I Have An Existing Mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing indebtedness must be paid off. You can pay off the existing mortgage with a reverse mortgage, money from your savings, or assistance from a family member or friend.

For example, let's say you owe $100,000 on an existing mortgage. Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish.

If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your own savings to get the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage. On the other hand, you won't have a monthly mortgage payment anymore.

If you find yourself in a deficit situation where you don't have enough money to pay off the existing mortgage, you may use funds from a grant or gift from a family member or friend to cover the gap, but you cannot incur a new debt obligation (i.e., loan).

[13inIN]

I may be wrong on this, but I'm thinking that because of the $130k in equity, he'll be required to pay the full $45k back in Ch 13. Roughly speaking and just skimming the surface, that's $1250/mo for 36 mo or $750/mo for 60mo. Otherwise I think the trustee would look toward forcing Ch. 7 since the full value can be recovered that way.

Seems that for the cost of a good pair of scissors for the cards and a trip to the bank that he'd be better off going the refi route.

[woeisme]

It totally depends on where the father lives and what the homestead exemptions are for the state he is in. Some states allow 100% of the home to be exempted, others are much less generous. If he's in a state that allows the home (and equity) to be exempt, he may be much better off with CH 7, or even CH 13, than refinancing. It all depends...

[13inIN]

True, since it is the primary residence he may be in much better shape.