Worried about home equity. Help me stay on track.

[shoopy]

I posted this on another board, but it is not getting much traffic yet. I hope that is not against the rules.

I'll try to make this short.

Married, I'm on disability, wife is working, we qualify for Chapter 7. I will be filing alone as all dischargable debt, including mortgage note will be in my name only.

County SEV value of house is approx. 50,000 making it worth a theoretical 100,000 (under optimal conditions, I guess). There is approx. 50,000 left to pay on mortgage, leaving a theoretical 50,000 in equity. The federal homestead exemption for filing solo is 21,625, which would leave an apparent 28,375 to satisfy creditors. I understand that the 100,000 is under the best conditions, but there is still enough potential equity there to make me worry a GREAT deal. Wife won't budge on filing also, in order to double exemption. It took me years to get her to the point where so won't divorce me if I file solo.

I live in Michigan. At first glance, Michigan exemptions would seem to provide a better option, offering disabled individual approx 42,000 exemption. Unfortunately, the 6th Circuit ruled Michigan bankruptcy specific exemptions unconstitutional, last year. SIGH.

I am looking at discharging approx. 36,500, all of it credit card debt. At this time I am not behind on any payments, but I can't keep it up.

We can not afford to lose the house, there is no way that we could even afford to rent in a crack neighborhood for what our monthly mortgage payments are. So, I am a bit scared, and worried that an attny might somehow screw it up.

I would appreciate input from anyone that is thinking more clearly that I am right now. Would chapter 13 be an option? Starting to lose my resolve a little. Suggestions, thoughts?

I have an appointment with an attorney this week, but I really have gotten any real warm fuzzies from any of the attorneys that I have spoken to on the phone.

Another possibility might be to just quit paying on the cards. My only income is from Social Security disability, my car is a beater with 200,000 miles on it and the house is co-owned with my wife, tenancies by the entirety, which might put it out of reach of a judgement, were someone actually to sue me.

Help?

[keepsmiling]

Hi and welcome.
FIRST THINGS FIRST.
Call in a realtor and get an appraisal. Point out the need for quick sale, and anything wrong with property that needs fixing.
You can make no decisions until you have a realistic idea.


Good luck and hang in there.

[keepsmiling]

I am shocked to hear about the court overruling a state's exemptions. Anyone else know about this???

[TheBajan]

I'm from Michigan. My husband and I filed together under the Michigan state exemptions rather than the federal due to exactly what you are talking about. We own a rental property in it's entirety and through the Michigan entirety exemption, we are able to keep it. My atty did mention that some parts of the Michigan exemptions were ruled against last year but it didn't affect our case. Keep looking.... find an attorney VERY FAMILIAR with Michigan exemptions. We talked to at least 8 or 9 attorneys before we even found one who understood BK law well enough to tell us anything about this so keep looking.
Best wishes,
The Bajan

[shoopy]

I can't post links yet, so please Google "michigan-bankruptcy-exemption-invalidated-by-court" the first hit should be the nolo website, where as the article says, the ruling is "...at odds with settled bankruptcy law in other parts of the U.S., so the issue may eventually end up before the U.S. Supreme Court."

Dunno if I can wait until the supremes get around to this.

Thank you for the realtor suggestion, good idea. Will they be upset at me for wasting their time?

[shoopy]

I'm from Michigan. My husband and I filed together under the Michigan state exemptions rather than the federal due to exactly what you are talking about. We own a rental property in it's entirety and through the Michigan entirety exemption, we are able to keep it. My atty did mention that some parts of the Michigan exemptions were ruled against last year but it didn't affect our case. Keep looking.... find an attorney VERY FAMILIAR with Michigan exemptions. We talked to at least 8 or 9 attorneys before we even found one who understood BK law well enough to tell us anything about this so keep looking.
Best wishes,
The Bajan

That's part of my problem, no one that I have spoken to on the phone seems like anyone that I would trust to handle this without making some mistake. I have an appointment with one attorney that wouldn't talk to me prior to meeting with him. Maybe a good sign, or maybe an indicator that he will be hard to get a hold of if I have any questions after filing.

I am on the West side of the state, and there seems to be only one group that deals exclusively with bankruptcy. I'm guessing that you are on the East side?

[keepmine]

If, the home is held T by E then, there should be no issue with the equity.

Here's a link.

http://www.law.cornell.edu/wex/tenancy_by_the_entirety

[TheBajan]

I am in the thumb area. I wouldn't focus so much on a firm as I would an individual who specializes in BK. Read the posts here on this forum. A lot of people who went with big BK firms ended up feeling like cattle. Take the time to go to the free consultations. I talked to a lot of atty's by phone as well as their assistants but no one can really help you without sitting down and taking the time to really look at your case. On the flip side, you won't be able to ask good questions until that happens. Up to then... everything is talked about in 'general terms' rather than specific. I probably talked to more atty's than most people but it took me a very long time to come to this point and I had so many questions. At first it looked like we were too broke to even file (no dmi). However, when we finally found the attorney that we ended up using, he explained options to us that no else had even mentioned and it turned everything around. Be comfortable with who you choose and be confident in his/her ability to represent you. I should mention that we filed a Chapter 13 due to the fact that we stripped a second mortgage on our primary home and b/c of the rental and an auto that was not exempt. I'm not sure how it applies in a Chapter 7.
Best of luck.

[shoopy]

Yeah, that's part of my backup plan if I decide to just quit paying. However, if I file chapter 7 using T by E to exempt the home and using the allowable Michigan exemptions for the rest of of household stuff, furniture, etc. Apparently, I would have to inventory every stick of furniture, book, tv, or whatever that i own and assign a value to them, and still probably come up short. On the bright side, I could keep several cattle, a bunch of chickens and other interesting items--seriously. No attny that I have spoken to has wanted to touch a chapter 7 using the current Michigan rules.

Using the Federal exemptions, I think you give up your right to Michigan T by E in exchange for the Federal 21,650 exemption.

Grrr, I wish I had time to go to law school and handle this myself.

[momofthree]

Just a thought off the top of my head...if you're filing solo, wouldn't only half of the equity in the house be yours and need to be exempted?

[TheBajan]

Yeah, that's part of my backup plan if I decide to just quit paying. However, if I file chapter 7 using T by E to exempt the home and using the allowable Michigan exemptions for the rest of of household stuff, furniture, etc. Apparently, I would have to inventory every stick of furniture, book, tv, or whatever that i own and assign a value to them, and still probably come up short. On the bright side, I could keep several cattle, a bunch of chickens and other interesting items--seriously. No attny that I have spoken to has wanted to touch a chapter 7 using the current Michigan rules.

Using the Federal exemptions, I think you give up your right to Michigan T by E in exchange for the Federal 21,650 exemption.

Grrr, I wish I had time to go to law school and handle this myself.

Yeah... I laughed at the things we are allowed to exempt but there's nothing for cars b/c the law was written before cars were invented. However, if I had a horse... I could keep him!
You are correct that it's an either/ or situation. In our case it was hands down the best options (really the only sensible option). At first, we thought we would have to do some inventory of our stuff but in the end the atty simply assigned a standard value to our household belongings and exempted them under a specific category that he called a 'catch all' spot for 'reasonable' living. The trustee didn't make any objections at all. That's something else I should mention... find an atty who is very familiar with the trustee who will be handling your case. He should know him/her well enough to tell you what their particular pet peeves are.

[shoopy]

Just a thought off the top of my head...if you're filing solo, wouldn't only half of the equity in the house be yours and need to be exempted?

That's an interesting question. My fear is that tenancy by the entirety is a state concept and wouldn't apply using federal rules, but it certainly doesn't sound right to be able to take equity that is co-owned by another to pay creditors of another person. Dunno.

[DebtEnder]

If the asset is owned by two then the TT would have to buy out the others half's stake. If the total equity is at most 50k then that leaves only 25k for you, and the court. Sounds to me like the exemption then is enough to cover any equity once you add in Realtor commission's and cost of sale.

Course you need to make sure the deed has both names on it.

[shoopy]

If the asset is owned by two then the TT would have to buy out the others half's stake. If the total equity is at most 50k then that leaves only 25k for you, and the court. Sounds to me like the exemption then is enough to cover any equity once you add in Realtor commission's and cost of sale.

Course you need to make sure the deed has both names on it.

I am certain that the deed has both names on it. The mortgage itself has only my name on it.

Buying out the other half's stake is what I couldn't wrap my brain around for some reason. All I saw was 50,000 equity of which 21,650 would be exempt and the rest up for grabs by creditors.

So, essentially, the court would have to pay whatever half of the equity is to my wife, give me an exemption for 21,650 on the other half, and distribute the balance if any to creditors? It's still hard for me to look at it that way, talk about a one track mind. Maybe I have been worrying about nothing.

[keepmine]

You're way overthinking this.
If the property is really held T by E exemption amounts are of no consequence. The non filing spouse can't have there ownership sold unless they give their permission. I have no idea what happened with the 6th circuit ruling but, T by E is a well settled concept in law and is a type of ownership allowed in close to half the states. I really think you're manufacturing things to worry about. Do some basic reseach on exactly what T by E means.