Can you own more than 1 home and file ch7?

[Catia]

Hello,
I am in a really bad situation, I am partially disabled, I have MS, so I go in and out of remission-I work whenever I am in remission-but I am not on SSD/SSI yet. I'm in total limbo. I am not working either. Obviously this is not good.
I am a resident of Pennsylvania. Currently I own 3 homes. 1 is in danger of foreclosure, and if it goes into foreclosure, there will be a deficiency, in PA they allow deficiency judgements. I was told if I filed BK that this would protect me from deficiency judgements...I would have to file ch7 because I cannot prove enough income for ch13, I am low income. Is there any way they would allow me to keep 2 houses if 1 was my residence and the other was for income (rent is about 600/month). Would ch7 force me to sell my other properties?
Is there any way to not lose everything?
Meaning is there any way to own a rental property and file ch7 and keep that property? I really need it for income.

[JRScott]

I'm not sure if you can keep more than 1 house in a chapter 7.

I'd advise 3-4 free consultations with local BK attorneys. Explain the situation and see what they think.

Most states only allow a certain amount of equity in a home. I suppose you might could cover the equity in the other one with a wildcard if its high enough in PA, but only if you don't have other property you need to exempt.

Sorry I can't offer more .

[HHM]

There are 2 issues, first is the asset issue which comes down to exemptions and equity, 2nd is the expense issue.

Regarding the asset issue, if all your homes are fully leveraged (i.e there is little or no equity), then there is nothing for the trustee to take. However, if there is equity you can generally only exempt equity in your primary residence (i.e. the homestead exemption). You may have a wild card exemption, but those tend to be small, so if you have significant equity in any of the homes that are not your primary, there is probably no way to exempt it, and therfore, there is a significant risk you could lose the 2ndary homes.

The expense issue is more tricky. Even if the homes are protected, as assets, the trustee and the court will probably not "allow" the expenses associated with those houses on your forms I & J.

However, to answer your basic question, can you keep rental property in a BK, the answer is yes. But as I pointed out above, there are several factors that need to be satisfied in order to do so.

Is raising the rent an option?

[Catia]

This stuff is all so new to me, and I am so confused and scared. I am trying to read as much here as I can so that I understand the responses given, and the language/terms used, so please bear with me if I sound stupid--

PA exemption is very low, has not been raised since the 1800's ($300! in property) but there is a federal exemption, and I think I am allowed to choose that instead, which is (if I am correct) $19,000 in property equity, and then I think, you are allowed up to 7000 in other stuff (furniture/appliances/things that you need in a house etc). I do not know if I am understanding that correctly, so if you do know, let me know!

I have health issues, and everything on that front is not situated as yet, sometimes I cannot work, so I depend on the rental for income. To me, this would be like taking my job away. Otherwise, when I am in remission, I am a waittress, no huge income there, but I can make it as long as I have the rental income. It seems there should be some type of 'exception' for the situation due to health problems.

The home in danger of foreclosure I am willing to let go if it has to go. I am trying to sell it 1st. I am only 1 pymt behind on that as of now.

The other 2 houses, the one 1 is for my residence, and there will be a private mortgage of $30,000 on the home, which is worth about 45,000. The other is the rental and was purchased very cheaply for $8500, is valued by county for 22000, but is in disrepair at this point, and not rented, but will be soon. I very thankfully have friends trying to help me out in theis situation, as I have no family.

I do not have a lot of "unsecured" debt, less than 2,000 at this point. I am frugal, and I do not live beyond my means. I am in dire straits right now due to health stuff.
The reason I was going to possibly file BK was to attempt to protect myself from the deficiency judgement if the 1 home goes into foreclosure. I also was told, and read here that if you have a foreclosure and a BK at the same time, it is counted as 1 incident on credit. My credit is in the dumpster right now, it would take me years to straighten it out anyway--and I would like somehow to have a fresh start, and this may be the only way to do this right now, if there is a way.
If I can get free of the 1 home that is losing me $$ bigtime, and avoid deficiency, keep my residence and 1 rental--I will be able to survive and could be back on my feet credit and financial wise in about 3-5 yrs, even with my health issues.

So basically, if I am understanding correctly, the more $$ in mortgages on the homes, the less equity I have, and that leaves the possibility of me keeping them? Jeeze that does not make sense. Then would'nt everyone in danger of BK who owns property just take out a mortgage and keep what they have???
Can anyone explain the concept?

[keepmine]

Then would'nt everyone in danger of BK who owns property just take out a mortgage and keep what they have???
Can anyone explain the concept?

Keep in mind, if you can't make the mortgage payments,you can't keep your property. The mortgage holder may foreclose even if you file bk.
See a few lawyers. Sounds like you have little equity in the rental due to the disrepair and you may be able to use the wilcard to exempt it.

[HHM]

So basically, if I am understanding correctly, the more $$ in mortgages on the homes, the less equity I have, and that leaves the possibility of me keeping them? Jeeze that does not make sense. Then wouldn't everyone in danger of BK who owns property just take out a mortgage and keep what they have???
Can anyone explain the concept?

Keep in mind also, most people only have ONE home and the equity exemption is usually enough to cover any equity in their house, also, if they are behind in their payments, chapter 13 may be an option to get caught-up (however, you don't appear to be a candidate for chapter 13 because your income is very low, but if you have very low unsecured debt, you "might" be able to do a chapter 13, but it would be risky).

So in that respect the answer is no...most people do not need to borrow against their home to file BK.

[Catia]

I do not understand the *wildcard* aspect. So far what I've read doesn't explain it.
Also, does anyone here know a site that gives info about how to have a mortgage attached to a property? Meaning if someone who is a family friend is willing to lend you $$ but wants your house as collateral? He said find out how it can be done and he well might lend me the $$ interest free, with special terms due to my health problems, and shaky income. Basically it'd be like if your big brother were gonna cover you until you're on your feet but wanted the house as collateral. He knows I will pay him back, he's known me my entire life, he knows how much I work when I am able. He has lent me $$ in the past to get through hard times, and since I've always paid him back he is willing perhaps to go further. He said I have to figure out the semantics of it, present it to him, and then we discuss it. He does not want his name on the deed due to possible liability, he just wants to attach the house, that way should I drop dead or become incapacitated, he will still get paid back. I'm all for this, but he wants me to do the "foot work" since it is a loan and not a gift, he is truly willing to help, and is a godsend in my life.

[HHM]

The problem with having someone you know loan you money is that (1) it is not a "purchase money" security interest (meaning, the money was not loaned to you to buy the house), and in some states, the Trustee can undue that type of loan and have it declared an unsecured debt.

A wild card exemption is simply a an amount of money or value you can exempt for collection on anything (the item of property is not specified by state law).

To be honest, you need to schedule some free consultations with BK lawyers in your area (most BK consultations are free). I really don't see you as a candidate for BK, since the bulk of your debt is secured debt and you have very little income. To be quite frank, BK won't help you that much.

[Catia]

OK, let me clairify why I may need to file BK. I am in Pennsylvania, which is a deficiency state. If I cannot sell the house in danger of foreclosure, and it is foreclosed upon, I will definately have a deficiency judgement. The only way to not have this happen if I end up in foreclosure is if I file BK.
Here is what I am trying to do:
I know foreclosure is on the table, and is more likely than the house selling. I am trying to keep it afloat as long as I can. I am trying to plan ahead for the worst case scenario. I have been researching BK stuff, and they go back and analyze 1-4 yrs of transactions and transfers. It is extremely important right now that I do not make any moves that could be reversed should I need to file BK due to FC.
If the house sells, no problems, but I must put in the time and find out the answers NOW, because it is more probable the house won't sell.
Would you kindly explain the scenario about the difference btwn a purchase $$ mortgage and a refinance?
The home that the mortgage is on was a refinance. I used the $$ to do many repairs on the home, and also some of it to purchase other property 2+ yrs ago. We had many issues in our county with re-assessments and taxes were raised, many people were foreclosed upon, at the same time, they closed the housing projects---and investors saw this as an opportunity to pick up property cheap--and within the past 2+ years, I kid you not, there are now over 200 section 8 properties, many are multi-family dwellings--within 1 square mile of this house. The property value has dropped tremendously, and the whole area is now ghetto, replete with drive-by shootings/drugs/car jackings. No exaggeration, it was front page news in the local paper this week. So the property is difficult to sell, because I need to cover the amount of my loan...

[HHM]

At least right now, a deficiency balance should not scare you too much. A deficiency balance is simply an unsecured debt. I suppose that having the other 2 houses complicates matters a bit...but whether that is an issue depends on if those other two homes have significant equity or not. So in that respect, I suppose the equity of your remaining non-primary residence would be at risk to the deficiency balance, but otherwise, you have very little income, few other non-exempt assets, so there is not much for the holders of the deficiency balance to go after to collect that money from you.

You are probably right, if there is a significant deficiency balance, you will probably have to deal with it sooner or later, but right now, you are "somewhat" judgment proof.

Because of the peculiarities with PA law, you need to speak with a local attorney to advise you.