Foreclose or Bankruptcy???

[TgasTee]

Hello... 1st post here. Here's my situation. My wife and I own 3 properties. We live in SF bay area. One house is 2 months late on payments. We owe 840k plus Heloc of 160k , house is now worth 600-650k. Other house is rented; payments are current although neg am. Primary house is current, neg am also. We have unsecured debts of around 40k, mostly ccs. We talked to a BK lawyer 2 weeks ago and got us qualified for Chapter 7??? We're planning to keep 2 houses...Wife and I make around 142k (gross)/year. You guys think we have a chance of getting discharge? Or should we just Short Sale the 1st property? Foreclose? What about the heloc loan; I heard you're still liable even after foreclosure... Any suggestions, advice.... Thank you in advance...

[lrprn]

Welcome to BK Forum - glad you found us!

You have a very complex situation with the three properties involved and that you want to file Ch 7 and still keep two of them. What qualifies you to be able to file Ch 7 is showing on the required Means Test and Schedules after all non-disposable debt is removed, you select one of the two California bk systems to see what exemptions can protect your assets (see http://www.bankruptcyinformation.com/Ca_exemp.htm ), and figure out your living expenses - you still show less than $100/month disposable income. That could be a tall order.

You really need to see at least four experienced bk lawyers who frequently file personal Ch 7 bankruptcies with real estate involved. Most give free or low cost initial consultations. Especially when you are over the median income (if you are for your family size in CA) and with property assets involved, you need expert legal counsel to help you sort out what your best options are.

Frankly looking at what you've shared about your finances so far, Ch 13 might be a better option for you to ensure you can keep your two properties. Be sure to ask about that during your lawyer interviews.

Ask questions as you think of them - we'll help you sort things out as best we can. However, we are not lawyers - just knowledgeable consumers like yourself. Go make those 3-4 additional bk lawyer appointments - good luck!

[mirage12]

If you're keen on keeping the home, filing chapter 13 makes sense. This helps you to pay off all or part of the mortgage, specially the amount by which you're behind on the loan. And this is done within a short period of 3-5 years. However, before you file bankruptcy, you'll have to go through credit counseling session within 6 months prior to the date of filing and then pass through the Means Test which confirms whether you're eligible for chapter 13.

[JRScott]

Short sell would be hard with 2 different mortgages, especially with the house value now less than the primary mortgage. Basically you'd have to get HELOC to agree to take nothing as I can't see you getting more than market value for it and then also have the primary loan carrier cut your amount owed by a third.

If it goes to foreclosure then yes you are responsible for the deficiency balance once it sells. However that debt can be discharged in bankruptcy. Surrendering it in the bankruptcy though is just one hit on the credit whereas foreclosure then bankruptcy is two hits. Though if you're two months late your credit has already been dinged.

I think it will be hard to keep more than 1 property in Chapter 7. However as lrprn says seek out competent legal advice in your area, you have to much at stake not to seek it.