How is secured property handled?

[Boscoe]

Question, as I am new. Secured property, like a second home, vacation home, etc. I have equity in the property - it is worth $650k with about $600k owed against it. The $50k in equity - from what I read, this would be a non-exempt asset, but wouldn't much of it be taken with marketing costs, closing costs, fees, etc? How could much of it even be available to unsecured creditors?

I haven't seen this in any posts or any other websites..........Thanks.

[SinkingFast]

You haven't seen any posts addressing issues like yours because most of us here make less than $100K/year. We can't afford to buy a first home worth $650K, let alone a 2nd or vacation home in that price range.

But, yes, you are correct about the costs to sell eating the equity. And the Trustee handling your case would certainly consider that as well.

When a Trustee siezes property to sell, many factors come into play.

Costs. Trustees hire someone to sell property just like regular folk do. On average, a Trustee will figure 10% to sell.

Time. Houses take a while to sell. Trustees want quick money. In and out, move on.

Which brings us to price. In order to move the property quicker, the Trustee knows it won't bring top dollar in the market.

If you hire a crafty attny, and you have a fair amount of Homestead Exemption to play with, your attny will most likely apply some Exemption on each of your 2 homes. That would discourage the Trustee from coming after your "vacation home". Because, when the Trustee siezes and sells the property, the Trustee has to be darned sure he/she gets enough to pay off the mortgage, pay you your Exemption $$$'s, and pay his/her costs to sell.

What looks like $50K of unprotected asset suddenly becomes very unappealling to a Trustee.

[Boscoe]

Actually, sinking fast, the numbers are not quite that high. I was just using #'s to make an example. So what would the trustee do? NOT take it? And I thought the homestead exemptions are only on primary residences......

[SinkingFast]

So what would the trustee do? NOT take it? And I thought the homestead exemptions are only on primary residences......

You are right about the Homestead Exemption. Depending on the wording of any particular State's Code, the Homestead could only be applied to the filer's primary residence.

Some States allow for any unused portion of the Homestead Exemption to be used as a WildCard on any thing else the filer chooses. Also, if you had some sort of WildCard, you could apply that to a second home as well.

And, yep. Pretty much, the Trustee does not take it. Very often, a Trustee will abandon property simply because it's not worth the hassle. Possibly other owners involved. The parcel is land locked. Any number of things can cause a Trustee to abandon property.

[anonymuse]

You need to take the fair market valuation of your home and subtract what it owed on it and any 2nd mortgages/home equity loans/liens. Then, subtract the homestead exemption for your state. If the result is negative, you do not have any non-exempt equity. If the result is positive, your probably have non-exempt equity. If the numbers are close, they will take into consideration selling and closing costs.

[Boscoe]

So if the trustee does not take it, then what? I've decided to surrender and how would I then be free of the property, i.e. lender takes it over and we move on.............