Which chapter is correct?

[mombk1]

Here is the situation:
1.) My mother has $27k in unsecured debts.
2.) Her only income is social security benefits of $1209 a month plus $300 from family members.
3.)She owns a house with a equity loan balance of $41K, the house is worth (in this economy) about $250K or less, in So. Calif.

The laywer I consulted, say she has to file chapter 13 because there is so much equity available on the house. (Even thiugh she owes $41K on it ).
But if she did not have a house she would qualify for chapter 7.

These past few years after she became a widow, she borrowed from one card to pay another bill, plus family pitched in too. Now the recession hit the family hard and can no longer help out. What to do?

Thanks

[HHM]

I'am afraid this attorney is correct. Unless the equity in the home can be fully exempted, she will not be able to file chapter 7 or realistically a 13.

She should look into to doing a reverse mortgage and pay off the debt. Eventually, the debts will go into active collection, someone will probably sue at some point, and if they get a judgment, they can put a lien on the home.

Under the circumstances you describe, bankruptcy is not an option. She needs to look at practical ways to pay the debt.

[TLK]

Call a consumer protection attorney. They helped me out of BK and I don't pay back a cent to unsecured creditors.

[wonkettegirl]

If the reverse mortgage is not possible, she can try to negotiate with some of her creditors. If that's not possible, she may have to sell the home and use the proceeds to pay her debts.

That option may be more attractive to her the older she gets anyway, as if she rented an apartment she wouldn't have to worry about keeping up the property, repairs, etc.

If she does sell and pay the debt, she'd still have a lot of money left over to roll into another property if she chose to do so.