purchase a home before bankruptcy?

[sofarindebt]

We are currently one month behind on our mortgage. We have tried to sell our house for 7 months but due to the bad market it won't sell. We owe $460K on it, and we qualify for another mortgage based on stated income. We have an investor who wants to do a short sale with the mortgage company, so we are going to buy another house this month and let our current one go, and hopefully the short sale will go through.

What is going to happen if we file bankruptcy in a couple months? We are $105K in cc debt. Can they deny the bankruptcy because we didn't buy a cheaper house, (it is a cheaper house but the payments are a bit higher due to the interest rate of "stated income")

Any advice would be great.

[Minnymouth]

It might be wise to wait at least 7 or 8 months before you file....... could look fraudelent to the Trustee since you are not downsizing in the size/cost of the home...... If you were purchasing a smaller, cheaper home nothing would be said. But if your upgrading, then file bankruptcy it could be in question........

Speak to a couple of bk attorneys about your situation and see what they say about it...... their consultations are normally free.......

See what options are available to you based on your expenses right now and then if you purchase this other home

Keep us posted.

[Brokerthanbroke]

New bankruptcy laws state you must be in your home about 3 yrs (may be 2.5) or it is not covered under Homestead exemptions (such as in TX).

I would check with a lawyer to make sure in your state.

[SinkingFast]

New bankruptcy laws state you must be in your home about 3 yrs (may be 2.5) or it is not covered under Homestead exemptions (such as in TX).

I would check with a lawyer to make sure in your state.

TX and Florida both had unlimited Homestead Exemptions under Old Law. That's why the phrasing in the New Law about the 1215 days Rule. Or whatever it is.

If you've owned your house longer, you still get the same Exemption as was in place before the New Law took effect. If you've owned your home less time, the New Law $125K Homestead Exemption cap takes effect.

I agree with Minny. If you were taking on a lower payment, that would be one thing. But taking on a higher payment on the eve of BK after bailing on a Short Sale on an existing house would look hinkey to the Court. Either wait to file or don't follow thru with the purchase.

[JusticeForAll]

One other thing to consider:

That "stated" income -- could come back and bite you in the butt!

If the Trustee or US Trustee starts examining your case because of the home purchase, they can (and probably will) ask for the original loan application and the closing docs.

If the 'stated' income is way higher than you are claiming on your BK the Trustee could cry foul (or fraud).