Chapter 13 before/during bankruptcy?

[Hello724]

So we have 80k in insurance money from a house fire but the house is still in bad condition also lots of mold. The money won’t fix it all. We rather sell and buy a new house but one lawyer we talked to is against it and tells us to use the money to repair and live at the house for now. Our state has homestead protection and we are well within in. Anyone know why he says this?

[justbroke]

He likely doesn't want to expose the money to the bankruptcy estate. You would need the attorney the specifics, but some states do not have a so-called safe-harbor for real property sales. For example, in some States, there is a specific carveout that allows a debtor to use the proceeds from the sale of a home to purchased another home within a certain period of time.

For example, in Lowe v. DeBerry, No. 5:15-cv-1135-RCL (W.D. Tex. 3/10/17), the court found that the money was not protected because it was not used within the six-month statutory period on a new homestead. I don't know if Massachusetts has any such protections. Your attorney would know the Mass. laws and is probably right that you only have so much time and/or Mass. just doesn't have a similar protection as does Texas.

[Hello724]

Its one year in Massachusetts its protected. But I don’t know ill double check. We live in Western Mass where it is rural maybe it is different.

[justbroke]

He is probably worried about obtaining a new homestead in time. Have you filed yet? If not, maybe it's best to get this sorted before filing. It can get dicey and there is no guarantee that you could be approved for a new home. Additionally, most insurance companies would issue a joint check in the name of the homeowner and the lender (lienholder). If you own the home outright, this could change some of the calculus but the underlying issue is *if* you can get into a new home within the statutory period. That may be too may "ifs" for any attorney.

[Hello724]

Okay thank you very much.

[despritfreya]

. . we have 80k in insurance money from a house fire but the house is still in bad condition. . .We rather sell and buy a new house but one lawyer we talked to is against it. . . Anyone know why he says this?

Assuming there is a mortgage against the home, the attny said what he said because the money doesn't belong to you. You are holding it in trust for the mortgage lender and if you don't use it to repair the lender's collateral, you may be liable for fraud or conversion or both.

Further, how are you going to sell property that is in "bad condition"? Are you selling it as a tear-down? If sold, will you get enough to pay the mortgage lender (assuming there is one)?

Des.