Not sure if I can file either. Equity issues vs underwater mortgage?

[MoOnBaBy]

I own 2 homes. 1 is with my exhusband and is severly underwater, owe approximately $100k, had it listed year and a half and as low as $75k, no buyers. Ex is currently living there with his new g/f and her son. He has threatened to take me to court if I stop making my half of the payments per our divorce decree, but that was put in not with the intention of it taking years to sell the property. I also have another inherited property I am fixing up to move into, I owe my sister half for it, approx $47k based on tax assesments. I currently have $27k in credit card debt due to life, fixing the house and issues with my ex. I just had the property appraised and it came in at $60k. My main question here I guess is if I get the final divorce decree amended to force the sale of the house with my ex, prob via auction, if the debt that comes out of THAT will cancel out any equity in my other home I intend to keep? Thus far I haven't been able to pay my sister because I cannot get a HELOc because of the other home and my DTI ratio. I've read online alot but it's all very confusing. The exemption for VA is only $5000, does that count towards the $12k equity? I have only spoken to a lawyer on the phone. Any advice is greatly appreciated.

[MoOnBaBy]

Just wanted to add my Gross HHI is $27k.

[despritfreya]

I own 2 homes. 1 is with my exhusband and is severely underwater. . . Ex is currently living there. . . He has threatened to take me to court if I stop making my half of the payments per our divorce decree. . . (What) if I get the final divorce decree amended to force the sale of the house with my ex, prob via auction.

If the decree ordered you to make the payment as a “property settlement” and is not “in the nature of support”, a Chapter 13 can get rid of this obligation. If it is "in the nature of support" (the bk court can make its own determination as to this) then the obligation is non-dischargeable and you would need to seek a modification (if possible) of the decree. The problem is that you cannot force the lender to take less than what is owed therefore the “auction” idea will not work unless it produces enough to pay all liens and encumbrances. You cannot force a short sale.

I also have another inherited property I am fixing up to move into. . . I owe my sister half for it. . I just had the property appraised and it came in at $60k. . . (can the debt that is left from the short sale, which probably will not happen, be used to) cancel out any equity in this property? ( I want to take out a HELOC against this property and pay my sister)

I do not know what you mean by "cancel out any equity".

If your sister is not on the title to the property with you or does not have a valid and recorded Deed of Trust against the property, if you plan on filing bk you better not pay her. If you do pay her you need to wait at least 1 year and 1 day to file as such payment is a preferential payment to an insider. In addition, if you cannot prove that you owe her money then the payment becomes a fraudulent conveyance and you must wait at least two, if not four, years to file. Bottom line DO NOT PAY YOUR SISTER A DIME IF YOU ARE GOING TO FILE A BK.

Now, if your sister is on the title you can purchase her 1/2 interest for fair value. Note: DO NOT ADD HER TO THE TITLE AT THIS TIME. Such would be a transfer that the bk court can and will set aside.

If the property is way over the allowed exemption I suppose you could take out a loan and use that money to pay your creditors and potentially avoid a bk. If you do not file I suppose you could include your sister in the mix. I do not know if such is possible. The property is worth 60K. Assuming nothing is owed and assuming you can qualify for a loan once the other home is gone, the most you would get would be approximately $42k (70% loan to value). This is more than enough to pay your general creditors but we do not know what will shake out from the marital property.

You really need to sit down with an attorney and go over all of these issues. If you need to file a bk now and you want to keep the "non-exempt" value you will be filing a Chapter 13 and committing to pay your unsecured creditors that non-exempt value over the 5 years of the Plan. This payment can be a combination of monthly payments and a liquidation of or a loan taken out against the property - all with court approval and assuming you can find a buyer or lender. Too many "what ifs" so you really need to meet with a well qualified attorney.

Des.

[MoOnBaBy]

Ok I've since spoken with an attourney but am still very very confused. He is including my sister's half of the property appraisal, as unsecured debt since all we have is a sort of promisorry note stating I would pay her if and when I could get a loan to do so. So that makes the total debt $57k, and he says I would have to pay $0.47 on the $1, which brings it down to roughly $26k, plus trustee fees of 10%. Now where I am confused is he is saying my payment would be over $500/month, and it just isn't adding up for me and also I do not see where he has included the $5k exemption for my state for my home. Also if I wait till March 2012 to file when should I stop paying the credit cards?

TIA!!!

[keepsmiling]

You should stop paying YESTERDAY. Really. Not much chance of them suing you right away, and if they start talking about it, you'll give them the lawyer's number.
I am wondering how you are going to do this on your income?

[MoOnBaBy]

I don't have alot of income, but minus the credit cards I wouldn't have much expense either. My employeer pays 98% medical, and copays. My lawyer is only charging $2000, and upfront court/class fees. I should be getting a work bonus in a couple weeks that should help pay the lawyer, my only concern is paying my real estate taxes come jan 2012. If I stop paying now do I need to stop using them as well? There is 1 I use and PIF each month for rewards $$$. I had to use one recently to pay for the appraisal on the home so I know that set the filing clock back 70 days.