I have a little equity after exemption

[flower]

This board has been very helpful. After receiving your help, I have some solid figures to work with.

Here's my situation. I and my significant other own a house together. Due to an illness, I am in serious debt, around $30,000 to $35,000. I earn around $3,500 to $4,000 per year as a substitute teacher. I only work on the days that my health is up to it. Our situation requires my little bit of financial contribution, but working makes it difficult to obtain disability benefits.

The tax assessed value of our house is $64,400. Our principle (sp?) we still owe on the house is $20,343.95. The equity is $44,356. If I file for Chapter 7 in the State of Indiana, I am allowed a $15,000 home exemption. Since I am a co-owner of the house and we are not married, a couple people on this forum told me that I am only responsible for half of the equity which is $22,128. The same two forum people told me the I could claim the entire home exemption of $15,000, leaving $7,128 of equity to the trustees.

Would I be responsible for paying back that amount? I only earn between $3,500 and $4,000 per year. How long would I have to pay it back? Would they do some sort of means test and do something like is done with Chapter 13, only requiring me to pay back a little over 1/4 of this amount?

My car is a 1993 tempo. It is paid for, but I don't think it is worth much and I need it to go to work. I don't have any fancy possessions or furniture, except for an upright piano, which was a gift to me. I don't know its worth, but it is almost 30 years old. Would they look at only my possessions? What if we share these possessions and he is not filing for bankruptcy?

How would this $7,128 of equity be handled? Surely they wouldn't take my house from me just to get $7,128 out of it.

Thanks from any of you familiar with this situation.

[Grace]

I would think you're in serious trouble owning a home with more equity than your debt. If you can manage to get all the exemptions you mention, I'd think you'd still have to come up with a payment plan for the $7,000+ in equity.

From what I've read here, your significant other's income also needs to be factored into your bankruptcy at some point if you're both sharing a household. I don't think you get to declare everything in the home as "shared" since you're not married.

I hope someone comes along to provide more information. And I hope your attorney is helping with some of these questions. Owning a home with that much equity, you definitely need a lawyer.

[flower]

Under a previous post of mine titled "Can I Keep My House", a forum member called "bezoar" said that he/she and a grandfather co-owned their home. They both declared bankruptcy a few weeks apart. They were both able to split the equity between them and they were both able to each apply the full exemption. So based on their experience, I concluded that I would only have the $7,000+ in equity left.

Since my income is so low, would I have to pay the entire $7,000 back. Over how many years? Or would I just pay back a percentage?

Anyone know?

[SinkingFast]

SO's income is not an issue, Flower.

If you were married, not filing joint, you'd get the Marital Adjustment where you'd back out "Hubby's" income anyway.

http://www.bankruptcyforum.com/showthread.php?t=11584

Post Number 13. Just so I don't have to retype it all again.

And YES you are entitled to your half of the equity. Your name's on the Deed/Title as co-owner so you can apply your Homestead Exemption just like you thought. You are right about that.

Are you absolutely certain of the value of your home??!!

I know I suggested you get some Realtors to give you a FMV but you felt you couldn't handle that due to health issues.

But, really, the market has declined so. Especially on resale housing. If you're working off a tax assessed valuation, that number could be a couple of years or more old. Maybe not truly applicable if you were to really try and sell your house in the current market.

And then there's the issue of costs to sell. A Trustee would have those, just like you would. 6-7% Commission to a Realtor. However much for Documentation and Title Transfer fees. Maybe you have to pay a Title Insurance as a Seller to guarantee a clean title. Sale costs could run around 10%.

So you might not have $7K of free and clear equity in your home.

Is getting a current market value something SO could maybe handle doing for you??

[HHM]

Tax assessed value is not the only measure of a properties value. Some people on this forum have said their trustee used that value, but tax assessed value tends to be lower than true market value, which is the standard in the BK code. So you may want to assess what the market value of your home is, not just the tax assessed value. If the market value is more, you can lower your equity burden.

As for the equity...you are in a tough bind, on the one hand, you are not married, but still share expenses...you own the home with someone else, but even with that person being entitled to half the equity, you still come out behind, AND, you really have no income to fund any sort of repayment plan.

As for repayments to trustee, the time line is generally not calculated in "years" but in "months". I think what you would need to do is 722 redemption financing. Basically, it would be like taking a second mortgage on your home to pay the trustee his rightful share of your equity if you chose to file BK.

[Grace]

SO's income is not an issue, Flower.

How is that possible? The poster has almost no income but has a bunch of expenses. Isn't the SO's income factored in and then subtracted out to some degree? If not, a debtor's best strategy would be to move into the household of someone with a good job, income, and little to no debt so that person could claim to be broke with no income and no expenses yet be able to live in a home and get food and shelter.

Hopefully you can clarify this for us.

[SinkingFast]

Flower may not claim any house payment expense. Just food and medical bills. Whatever actual expenses Flower pays. There are any number of ways this situation could be handled.

So Beyond Broke was in the same situation. Look up that Member's posts. SBB filed Ch 7, Pro Se in NY earlier this year. Did not list SO's income. Just SBB's income and SBB's portion of expenses SBB actually pays for.

Poor people can live with friends and/or family members and have no direct housing costs when they have no where else to go. BK Courts see it every day.

SAHM's don't earn income and file joint with their Hubbys every year. The Court does not hold that against the SAHM. Debt is Debt is Debt. Ability to pay that debt is the concern of the Court.

The possibilities within BK are as endless as the individual people filing BK.

[SinkingFast]

And one other little note here,............ Flower has suffered health issues. Prior to that time, Flower paid her portion of the bills. But due to illness, Flower is unable to work enough to pay all of Flower's current bills.

That situation right there could easliy fall into "Totality of Circumstances". Flower earned significantly more prior to the onset of illness. Now, Flower's earning power has been significantly reduced.

Courts do consider that as well.

[Spartan]

I am curious on how the trustee is going to get his/her hand on her share of the equity that is greater than the exemption.

I don't think they can just take the house. Wouldn't that just infringe on the property right of her SO? Can they force her to do a redemption financing, when she has no way of repaying the financing? That doesn't sound workable. Who is going to loan her the money when she is in no position to repay?

This would be one to toss at the attorney at the free consult.

[flower]

Thank you all. My mind is a little fuzzy and this is Christmas Eve, so I will go back and read all of this when I can better understand it.

I do not pay house payment. I pay utilities, medical bills, and food sometimes. You have to realize, when you are disabled it is very difficult to be assertive, and at times I have paid for the above things with credit cards rather than assertively say "I don't have the money" to significant other. And because I have very little to contrubute to our income, he has used his cards to cover for me many times. So, I try to avoid aguments during this stressful time.

My illness is stress sensitive, and I avoid confrontations to preserve my energy in order to semi-function. I never realized all the obstacles that appear when one is disabled. This really opened my eyes, and if I had more energy I would be out there as an activist.

One thing that did confuse me was the post of HHM who said that that market value could be higher than the tax assessed value. That I should look into the market value and if it is higher, that would lower my equity. Wouldn't that increase my equity?

And I agree that homes are virtually impossible to sell right now, so it seems that tax accessed value would be less. The tax accessor office told me that the figure they quoted me was current, and I told them I thought that homes were losing their value because of the housing boom collapsing. They told me "no" that the tax assessed value was going up.

Does this make any sense? Perhaps they know that there is going to be a slew of bankruptcies, and that is why the tax assessor hasn't adjusted for the housing collapse in order to cut down on the number of bankruptcies.

[Spartan]

I believe tax assessed value tends to lack behind the market value. In a booming housing market, the market value of your property will tend to be higher than the tax assessed value. Under such situation, valuing based on market price, will make your equity HIGHER. In a depressed housing market, the market value will most likely be lower than the tax assessed value, and using that criteria, will make your equity lower.

Since the housing market is pretty much dying on the vine as we speak, my bet is, the market price of your house is lower than the assessed value.

I am not that well versed in real estate. In my limited experience, talking to a real estate agent will be able to get you some idea what similar houses have been selling at, at your area, recently, and what realistic price yours is likely to fetch. You don't have to pay for this type of preliminary info. If you want it documented, then you have to pay for a proper evaluation.

[bige1030]

If the trustee decides that he wants your non-exempt equity, HHM has the right idea - second mortgage (or refinance) to pay off the trustee.

Unfortunately, whether or not you are able to buy your home equity does not factor into whether or not the trustee wants the equity. He can always sell if he wants it. What will matter to the trustee are several things - some of which SinkingFast already mentioned (cost of sale).

The trustee can't just sell on the foreclosure market, either - he must get the value of the house for it to be of any benefit to creditors. After a sale, he will have to pay:

* The lender: the value of the lien
* Your SO: the value of your SO's equity
* You: the value of your exempt equity
* Costs of sale
* His commission

before paying any creditors. If he decides that the property is too burdensome to sell and is of no benefit to creditors, he will just abandon it to you. If he can sell and have a substantial amount of money left over for creditors, he will sell. However, what is "worth it" is up to the particular trustee.

Getting a lawyer is probably your best bet. Lawyers tend to know about these types of situations, which are highly dependent on what your trustee is like. A good one will have been through this before and know what the trustee's expectations are like.

[flower]

Being that we will only have about $7000+ left , I doubt if it would be worth the trustees time when he figures in commissions, etc. And as Spartan pointed out the housing market is floundering badly. So I guess I will have to get a real estate agents opinion..

My fear is that the real estate agent will still price it high in hopes of making a larger profit and only reduce the price later to get more potential buyers. Can I trust their initially estimate of my house? I guess I could say that I want to sell the house in a hurry in order to lower the selling price, but would the trustee except that figure?

Thanks