Equity in House

[howdidithappen]

If the equity in your house, is more than your total debt (house, credit cards, etc.) does it make sense to file bankruptcy? I've been told it doesn't make sense but I'm concerned about all the fees and additional interest that are accuring on those balances.

[keepmine]

How much equity does your state allow you to exempt in bk? How much is your cc debt?

[howdidithappen]

I think in NJ it's about $20K (I have 10 times that in equity). Debt is around $100K

[OhioFiler]

It doesn't appear you're a candidate for bankruptcy with $100K in debt and $180K in equity.

[UpsideDownMI]

To me your best option would be to use your home equity to pay off your debt either by selling or home equity loan.

[justbroke]

I would go one further. You would negotiate settlement amounts with your creditors to pay less than 50% of the balance. That way, you don't need to take too much equity out of your home.

Since you're talking about filing bankruptcy or paying off your creditors, I'm assuming that you're already in credit trouble. If you're going to do this equity thing, you absolutely need to decide this real soon since your credit will get worse, and you won't be able to pull any equity out of your home!

[howdidithappen]

Unfortunately, my credit is shot....

[Never_Again]

That puts you in a tough position. If you file for bankruptcy, and go chapter 7, the trustee will sell your house, and used the equity to pay your creditors, giving you what is left over after he takes his share. It doesn't seem to make too much sense, when you can accomplish this yourself, negotiate with creditors, and pay less. The only difference is that you may (and probably will, given the equity situation) have lawsuits and judgments.

Chapter 13 will give you protection from creditors, while giving you a chance to pay back creditors under protection from lawsuits.

If selling is the way to go, you will at least have $100K (or more, depending on how well you negotiate with your creditors) to start over again with.

[howdidithappen]

I've been told that since it will all have to be paid off to NOT file for bankruptcy - does that make sense?

[justbroke]

I've been told that since it will all have to be paid off to NOT file for bankruptcy - does that make sense?

Who told you that?: An attorney?

If it was an attorney, did he review what could happen? If your creditors get judgment liens against your home? The litigation that will ensue when the creditors find out you have a really ripe asset (a home with $200K in equity)?

The reason you'd have to pay 100% in a Chapter 13, is because the equity exceeds what you owe. That's just plain and simple. The upside is that you would suspend all collection activity including accrual of interest and fees during a Chapter 13. However, you may not be able to "technically" afford a Chapter 13. If it were a 5 year plan, and your unsecured creditors are owed $100K, you're looking at $1,667/month in payments, just to the unsecured creditors.

You may be able to refinance a couple of years into the Chapter 13 and buy out the plan. All of these scenarios should be discussed with a professional asset protection attorney or a bankruptcy attorney.

I think siting and waiting around, could be a bad move.

[howdidithappen]

I was told that if I filed bankruptcy the trustee would order my house sold and that the trustee would basically control the sale of the house, meaning that they could continuely lower the sale price.

[justbroke]

I was told that if I filed bankruptcy the trustee would order my house sold and that the trustee would basically control the sale of the house, meaning that they could continuely lower the sale price.

While all my questions weren't answered, I'll examine this post. If you were to file Chapter 7, yes indeed you'd have to either pay the unsecured creditors from the liquidation value of the home, or the Trustee will sell the home.

If you want to keep the home, you'd need to file Chapter 13. I listed the concerns on filing Chapter 13 in my prior posting.

It seems you want to keep your home, but you have no ability to refinance. I suggested the refinance inside the Chapter 13 as a way to accomplish this. If you're in a District that allows it, you could even propose a plan with a "lump sum" payment towards the end of the plan for the unsecured creditors.

Did you talk to an attorney or asset protection attorney?

You have serious issues. New Jersey does not have any (real) homestead protection, so your unsecured creditors could come after you anyhow. You need to come up with a workable strategy. if you want to keep your home, your only option may be Chapter 13.

I really encourage you to speak with a really good asset protection attorney and/or a really good bankruptcy attorney.

[howdidithappen]

Thanks for your replies. A lawyer told me I could not file a Chapter 7 due to the equity in my home and that in filing a Chapter 13 and due to the equity in my home I would have to pay evryone back in full. Since I am not able to repay the entire amount in 5 years, I would be ordered to sell my home and that the trustess would control the sale. What is an asset protection attorney? I appreciate your help.

[justbroke]

Thanks for your replies. A lawyer told me I could not file a Chapter 7 due to the equity in my home and that in filing a Chapter 13 and due to the equity in my home I would have to pay evryone back in full. Since I am not able to repay the entire amount in 5 years, I would be ordered to sell my home and that the trustess would control the sale. What is an asset protection attorney? I appreciate your help.

I would suggest you talk to a few more attorneys. You could be able to structure a Chapter 13 Plan where you don't pay the unsecured creditors until late in the plan. You would make this 100% payment by refinancing your home while in your Chapter 13. You would essentially buy out your plan at 100% once you refinance. It is actually possible to refinance in a Chapter 13. The issue will be, will the Court confirm a plan with a balloon payment based on a refinance (my District allows this).

The reason I suggest you talk to an attorney who is good at asset protection is because you are very vulnerable to your creditors by just sitting there and doing nothing. An asset protection attorney could be a bankruptcy attorney, but is just a professional who specializes in keeping your assets when you have creditors at bay and/or facing bankruptcy. A good bankruptcy attorney can act in the same capacity.

I'm not trying to scare you, but you have property in New Jersey with approximately $200K in equity. You have unsecured creditors that are owed some $100K. You have no real way to protect that property outside of bankruptcy. If you really want to keep it, I think your only option is a Chapter 13. Otherwise, you will be forced to sell it either in a Chapter 7 or once the unsecured creditors start getting judgments and seek to attach them to your property.

[lrprn]

Although it won't resolve your $200K equity problem, in New Jersey you can also use the Federal exemptions - http://www.thebankruptcysite.org/exe...s/federal.html

The Federal homestead equity allowance is $20,200 - still it's way better than NJ's zero. It's one way to protect at least some of your equity, especially if you can get the creditors and collectors to agree to accept less than the $100K you currently owe them before you file Ch 13.