BK debt limit questions

[highlife]

I have gotten two different opionons from two diffrent attorneys on the total debt limits for filing a bk. Our total debt (secured and unsecured) is about $1,100,000. About $286K is a first and second, which we were going to re-affirm.

My questions is that since our total debt is above the approx $1,001,000 threshold, would be not be able to file a 7 or 13?

One attorney states that since we are re-affirming the $286,000 (we are not behind on any payments) It is not included in the BK total debt amount.

The second attorney states that it is a debt, and therfore included in the total. They said our only option would be a personal CH11. Not finacially possible.


Does anyone have any opions or experience with these matters? Help!

[angles]

It does not sound right to me. For BK 7 there are no limits that I am aware of. If you are shooting for a BK 13 then there are limits for secured and unsecured debt.

[HHM]

The 2nd attorney is correct in the sense that your intent with the debt DOES NOT matter in the context of BK section 109 debt limits.

As was pointed out, there are NO debt limits for chapter 7 BK. However, for chapter 13, the debt limits are approximately $1.01MM for secured debt, and $336K for unsecured (although that numbers recently changed, so that amount may be inaccurate and I am too lazy to check, but they didn't change by much).

[UWFan]

I have gotten two different opionons from two diffrent attorneys on the total debt limits for filing a bk. Our total debt (secured and unsecured) is about $1,100,000. About $286K is a first and second, which we were going to re-affirm.

My questions is that since our total debt is above the approx $1,001,000 threshold, would be not be able to file a 7 or 13?

One attorney states that since we are re-affirming the $286,000 (we are not behind on any payments) It is not included in the BK total debt amount.

The second attorney states that it is a debt, and therfore included in the total. They said our only option would be a personal CH11. Not finacially possible.


Does anyone have any opions or experience with these matters? Help!

It sounds like you are NOT eligible for a 13. Too much unsecured debt is my guess, but I don't know unless you actually give us the figures for amount of secured and unsecured. You are eligible for a 7 IF you can pass the means test and not have your case dismissed based on the totality of the circumstances, which is possible apparently even if you pass the means test. Look at my recent posts and you will discover that I am dealing with the same issue more or less.

Another poster referred to this as the BK black hole and it absolutely is. Not eligible for a 7 or a 13. The laws are just plain dumb. They need to rework them imho to accommodate this specific scenario.

Anyway, if you list your specific amounts of unsecured debt and secured debt someone will probably be able to assist you further. It sounds like a 7 is your best option IF you can get qualified for one and that totally depends on your income and expenses which you do not state here.

Good luck!

[HHM]

It sounds like you are NOT eligible for a 13. Too much unsecured debt is my guess, but I don't know unless you actually give us the figures for amount of secured and unsecured. You are eligible for a 7 IF you can pass the means test and not have your case dismissed based on the totality of the circumstances, which is possible apparently even if you pass the means test. Look at my recent posts and you will discover that I am dealing with the same issue more or less.

Another poster referred to this as the BK black hole and it absolutely is. Not eligible for a 7 or a 13. The laws are just plain dumb. They need to rework them imho to accommodate this specific scenario.

Anyway, if you list your specific amounts of unsecured debt and secured debt someone will probably be able to assist you further. It sounds like a 7 is your best option IF you can get qualified for one and that totally depends on your income and expenses which you do not state here.

Good luck!

Well, strictly speaking, if you are not eligible for chapter 7 due to means test, but not eligible for chapter 13 due to debt limits, that only leaves chapter 11. Individuals CAN file chapter 11 bankruptcy, but it is often times cost prohibitive.

[highlife]

Here are specific secured/unsecured amounts:

Secured:
First on House $125K
Second on House $161K (heloc)
Third on house $580K (mortgage was security/collateral on business loan)

House valued at about $292K on Zillow, I'm not sure if we could get an appraisal that would be low enough to strip the third in a CH13. It would be close and probably contested.

Unsecured:
Personal/CC: $60K
trade debt: $186K


Quick question. It looks like our unsecured debt is lower than the limits, same with the unsecured portion. However, if you add them together, we our over the $1.01 Million mark. That is my concern. By the way, we checked, and we do pass the means test for a CH7.

This may sound wierd but for some reason a CH13 just feel better to me. What I mean by that is at least I feel like I am getting the chance to try and pay everyone back to the best of my abilities. It seemed like the CH7 may be better for my family though. I am just not sure what happens to the lien for the third in a CH7 if we keep the house. (our exemption would allow us to keep the house) The bad part is my credit score was an 805 before everything went south for me with the business. How's that for a dramatic turn of events!

[HHM]

You seem to keep missing the point about secured vs. unsecured debt. The 1.01MM mark is only for "SECURED" (i.e. mortgages, car loans, secured business lines of credit, etc) debt.

However, you are over on unsecured. Keep in mind, the portion of your mortgages that are not covered by the value of the home get counted as "unsecured debt", especially if you are trying to strip a lien in a chapter 13.

By my calculation, you have $574,000 of unsecured debt just related to the mortgages, then add in the other $246K in unsecured debt, you are WAY over the $336K "unsecured" debt limit for chapter 13, so I see no scenario in which you would file chapter 13.

Also, it appears you would qualify for a non-consumer chapter 7 BK since more than 50% of your debt is business related. The only problem with doing a chapter 7 in your case is the 3rd mortgage on your house, chapter 7 provides no mechanism to remove that lien.

[highlife]

I wasn't sure how that "unsecured" portion of the 3rd got figured into the equation.

I agree with you about the CH13, and the attorney that we are currently using mentioned the same thing.

I think the problem that everyone is wrestling with is what happens to the third if we file a CH7? It looks like we wouldn't be able to get rid of it, therefore it would survive me filing a CH7. Does that mean that the bank could/would just wait until after the BK is finished, and try to instigate a forclosure at that time? How would that work if our exemptions are enough to keep the house, but the bank could just keep the lien and do something after the BK? I know there would be no money in it for them, but there is a lot of bad feelings/spite from teh bank at this point. Any suggestions or ideas?

I keep wondering if it is even worth filing a BK if the whole reason we are filing the 3rd/bus loan, doesn't get solved. We offered the bank a 5-7 year repayment paln, but they pretty much spit in my face on that one. I guess I can't figure out what would happen in this scenario. Not your typical situation I guess. Thanks for the input. I have a ll of the fears/questions, and it nice to be able to get them out in the open.

[HHM]

You have enough other debt that BK IS NECESSARY.

The issue becomes, what sort of strategy do you use for the 3rd mortgage. If the valuation of the home is accurate, there is no way the bank holding the 3rd will initiate foreclosure, they have to buy out the first and second to do so. Even if they did initiate foreclosure, it would be a bluff.

I think you should probably move ahead with the chapter 7, after the chapter 7 discharge, negotiate a settlement with the 3rd mortgage, OR, file chapter 11 bankruptcy, but unless you have $15K for attorney's fees sitting around, probably not going to be a viable option.

[highlife]

I agree that we realistically need to file a CH7. Valuation is probably pretty accurate. County auditor's site has the home valued at $312K, so not that far off. Would the fact that I would keep, and still be living in a $300K house after filing BK possibly be considered an abuse by the BK court or federal trustee?

Like you mentioned, the third is the odd ball sticky point to the whole deal. My attorney mentioned that we could try to make a deal with them during the BK process on the third. Is it better to wait untill after a discharge to do any type of deal, or better to do it during the BK process?

If we can scrape the money together for a CH11, are there any advantages to a CH11 for our particular situation?

Are there any advantages to surrendering the house in a CH7, even though we have enough exemptions to keep it?