If I could get an answer to this, I could get some sleep.

[StrawberrySu]

How do you think trustee will classify this mortgage? I am hoping to file non-consumer chapter 7, but I don't know if I will qualify.

My business debt is from two rentals, and I don't know if one rental will pass. It was originally our home, and we refinanced right before renting it out. We had a VA loan, and we did an interest rate reduction loan. Usually with a refi or a new loan, you are required to live in the home for a certain period after the loan is given, like one or two years. Not so with a VA IRR loan, otherwise we could not legally have rented it out.

Our refi loan documents have a place to check off Occupancy Status. The paperwork we signed did not have anything checked off, and we ended up checking off the box that we no longer occupied the property, and initialing it, because we wanted it to be clear we were renting the property. We then signed a rental agreement 3 days later.

So since I have been told the court looks at the intent of the loan, I am hoping it will qualify us. I just hope an attorney will be able to definitively tell me so. I am terrified of going in to bk court thinking I am non-consumer, with maybe $1500 DMI, then having the trustee decide the second rental doesn't qualify.

I posted this in another poster's thread, so thought my best chance of getting an answer would be to start my own thread. If the attorney I choose says he is sure it will be okay, do I have to worry that the trustee will dispute it? If I can't file non-con, then I need to make totally different choices in the future expenses I take on when I move. Thanks for any advice.

[AngelinaCatHub]

Ms. Berry, you did nothing with bad intent or faith. You are paying good money for a lawyers advice. Take it, he is paid to know, find out, or worry, for you. Get some rest as at that time, I am sure you were not intending to bk. You made a business decision and of course bk is a business decision. Relax, share a glass of sherry with your hub and chill out and tell him to do likewise. Enjoy life, it will go smother than you think. After all I KNOW! I am the king of Eeff ups when it comes to bk. We lost a lot, but we have gained more. Otherwise, how could I meet a nice person like you? 'Hub

[considering7]

I think the "test" about whther your mortgage is business debt, or consumer debt has to do with the intent you had when you took the loan. If your refi was a simple interest rate adjustment, then the loan is considered "personal" since the loan was taken out when your intent was to live in it. If on the other hand the original loan was paid off at the time of the refi, and a new loan was opened at the time of the refi, then the intent at the time you opened this new loan would be business. In otherwords you took out the new loan with the intent to use it to finance a house which is part of your rental business.

Of course, I'm no lawyer.

[StrawberrySu]

Ms. Berry, you did nothing with bad intent or faith. You are paying good money for a lawyers advice. Take it, he is paid to know, find out, or worry, for you. Get some rest as at that time, I am sure you were not intending to bk. You made a business decision and of course bk is a business decision. Relax, share a glass of sherry with your hub and chill out and tell him to do likewise. Enjoy life, it will go smother than you think. After all I KNOW! I am the king of Eeff ups when it comes to bk. We lost a lot, but we have gained more. Otherwise, how could I meet a nice person like you? 'Hub

Hi 'Hub! I guess I didn't make it clear .... I don't have an attorney yet! We will be filing in another state, and haven't moved yet. We plan on going in June, using a friend's address in the state, and meeting with attorneys. That's why I have so much trouble sleeping ... so much is dependent on whether or not we can file non-con 7, and I have no way of knowing for sure whether we can. It is very stressful! I don't drink much, in fact have a quartet of wine coolers I bought last summer and never drank, but my hubby and I will toast you tonight with a beer (him) and a Pepsi Max (me), lol. Thanks for your encouragement!

[AngelinaCatHub]

I have asked a very nice newer member who is a MI attorney to look at your thread. BKattorneyMI I believe. He seems pretty sharp and a nice guy. I'll be watching your thread. 'Hub

[considering7]

We will be filing in another state, and haven't moved yet. We plan on going in June, using a friend's address in the state, and meeting with attorneys.

Berry -
I read somewhere that you have to live in the state that you file for 2 years before you file. Otherwise you have to file in the state you used to live in. Is there a benefit to filing in the new state? (i.e. does the new state have higher exemptions?)Be careful if you are going to be untruthful a about where you actually lived for last two years. It's possible the trustee could consider that fraud if you were trying to protect more assets from your creditors then you are legally entitled to at your old state.

[StrawberrySu]

Thanks so much, 'Hub, I am hoping some of the attorneys will comment.

And Considering, I have a rental application dated 10 days prior to the refi contract date, and then signed the rental agreement with the applicant 3 days later. So I am hoping my paper trail will prove our intent as well as the Occupancy box checked on the paperwork. I am just worried as it was done at closing, even though we initialed it, that might cause a problem. In fact, renting the property was the only reason we did a refi, to get the monthly payment down in order to secure a renter. Otherwise, it would not have been worth it to add all new refinance fees. But maybe the trustees are so dang busy they will not fine-tooth comb this?

[LadyInTheRed]

considering7, you are confusing which state's exemptions you use with which state you file in. You file in the state where you currently live even if you have to use your prior state's exemptions.

[StrawberrySu]

Berry -
I read somewhere that you have to live in the state that you file for 2 years before you file. Otherwise you have to file in the state you used to live in. Is there a benefit to filing in the new state? (i.e. does the new state have higher exemptions?)Be careful if you are going to be untruthful a about where you actually lived for last two years. It's possible the trustee could consider that fraud if you were trying to protect more assets from your creditors then you are legally entitled to at your old state.

Considering, we will be filing in North Carolina. We must live there 90 days before we can file, and we will be using federal exemptions. I am very careful that we do not do anything illegal, that we track all our expenses, that I can document everything I claim, and I withhold nothing. I am not a good liar (the phrase "i think the lady doth protest too much" would apply here). I will be a wreck when I go to court, but will not need to worry about anything done improperly on my side (whew!)

[debee]

We had two rentals. We refi'd one of them just before renting it out as well. We didn't get investment loans (with their higher down payments and interest rates) to buy the properties. In both cases, the loans were for "owner occupied" properties. We converted to rentals after we got the loans. In terms of the kind of bk we qualified for, the deciding factor wasn't how close in time the refi was to the rental date. It was the intention at the time of the loan as indicated by the terms of that loan.

[StrawberrySu]

We had two rentals. We refi'd one of them just before renting it out as well. We didn't get investment loans (with their higher down payments and interest rates) to buy the properties. In both cases, the loans were for "owner occupied" properties. We converted to rentals after we got the loans. In terms of the kind of bk we qualified for, the deciding factor wasn't how close in time the refi was to the rental date. It was the intention at the time of the loan as indicated by the terms of that loan.

Ok, so Debee, are you saying you think we will qualify based on the fact our intention was to rent and the loan terms are a VA interest rate reduction, which is the only, to my knowledge , refinance loan we could do without committing to live in the property? (in your opinion?)

[debee]

I'm inclined to think it won't fly as non-consumer. Since it was a rate reduction refi and not a complete new loan drafted (as an investment loan), I'm thinking they will look at your intention at the time you took out the original loan.

After all, the refi wasn't an investment loan, just a rate reduction on that first loan. I think that is what's going to count. The fact that you moved out of the house doesn't make it an investment loan. You could have moved out in order to travel the country in your Winnebago indefinitely. I don't think the check box on the rate reduction refi is going to save you here.

edit: If it were me, I would be looking into ways of getting some lawyer feedback on the loan in the district where you intend to file. You could find someone and Fedex your loan docs, or scan/email them. There's a lot at stake here. That's what I would do. Get the answer so you can start sleeping again!

[StrawberrySu]

Debee, you are probably right. I guess I was assuming since I went from Wells to Citigroup with the refi it was a new mortgage. I know some posters have had refis where they used part of the cash out to purchase other properties, and that amount of their refi was considered non-con, so thought that I would qualify.

Will definitely meet with attorney in our new location before we move so we can make the best decisions.

So when are you going to draw in a "vote for me!" sign on your avatar? After he officially declares? Oh, that's right, you won't tell me everything you know......

[debee]

LOL @ "vote for me". I'm merely a slightly better-looking look-alike. Maybe I can apply for a part-time gig as security decoy. Bobbing and weaving the rotten fruit, ladies underpants, or whatever.

VA refi is weird because you don't have to jump through all the usual underwriting hoops as far as credit, income, appraisals, etc., and you have to certify certain facts with the new loan that applied with your original loan (that it was owner-occupied). That's what makes me think they will go back to your original terms. It's new, but also not-new. Just mho.

I called a lot of lawyers and asked a lot of questions relevant to our situation before choosing someone. Not because I was vetting attorneys but because I wanted to make certain decisions/moves before retaining anyone. Most wouldn't talk to me, and one of them was a moron, but a couple of them did talk and I got some good answers that turned out to be accurate. If you're going nuts thinking about it, might help to make some anonymous calls.

[ValleYum]

I found this about VA IRRRL loans to further cloud things up:

Many veterans may be aware of the streamline refinance, however most don't realize that you do not have to occupy the home to be eligible for this loan. If the veteran purchased the home using his/her VA benefit, occupied the home after purchase and moved but retained the home as a rental, the IRRRL is still available as long as the mortgage is current. This is the rare exception to the VA guidelines that allow a veteran to use his/her VA eligibility on an investment property.

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