Do I have too much equity in home to file ch13?

[ferfermom]

We have $80,000 in credit card debt that we cannot afford to pay anymore since all the rates skyrocketed recently.
We have lived in our modest home that we love for 23 years. Our home is valued at approx $125,000, and we only have 3 years left to pay on our mortgage. The principle balance is about $20,000 left to pay.
We also have a home equity line of credit we took out on home in 1998 paying 5 percent interest on with balance of $44,000
My husband will be retiring in 5 years after working 30 years . I will continue to work.
Should we file chapter 13? any help or suggestions would be appreciated

[lrprn]

Welcome to BKForum - glad you found us!

Our home is valued at approx $125,000...

How did you get this current value for your home?

...and we only have 3 years left to pay on our mortgage. The principle balance is about $20,000 left to pay. We also have a home equity line of credit we took out on home in 1998 paying 5 percent interest on with balance of $44,000

If your home value estimate is correct, then you have about $56,000 in equity. You left out one very important piece of information - what state do you live in? We need to know the state to know how much home equity you can protect when you file.

Should we file chapter 13?

A few other important pieces of information it would help to know are:
- Why are you filing Ch 13?
- What is your annual gross income?
- Have either of you earned extra money from any sources during the last six months or so?
- What's your current family size? (The two of you, plus do you have any kids under 21 still living at home or other adults?)
- What other secured assets besides your house are you hoping to keep after filing? (Cars, other property, etc.)
- Have you made any large transfers between credit cards or charged luxury items in the 6-12 months?

You need to set up free initial consultations with 3-4 experienced bk lawyers in your area who file Ch 13s regularly. This is the very best way to find out if filing Ch 13 will resolve your financial problems. You'll learn a great deal about filing plus you'll find out if you have any problems that will make filing more complicated.

Hang in there! You've already made the most difficult decision - deciding to seriously investigate bankruptcy as a way to resolve your financial troubles. Continue asking questions - we'll help you sort things out as best we can.

[Flamingo]

In addition to lrprn's excellent info above to you, note that you state you only have three years left to pay on your mortgage. If you need to file a five year Chapter 13, your disposable income will increase by the loss of the mortgage payment and you will probably have to modify your plan at that time. Your best bet, as lrprn stated, is to go get some free consultations...put together a complete listing of all your debts, monthly payments, sources of income, recent paystubs, a listing of all your assets, and copies of your most recent state and federal tax returns...take those with you...best of luck to you...we also had a lot of equity in our home and we were able to make it through but we had a very high Plan payment to do so but worked to get the plan payment down and refinanced the balance of the Chapter 13 in the end with part of the equity we accumulated during the Plan years and what we had held on to. Speak with several attorneys...

[ferfermom]

Thanks for the quick response.
I estimated home value off of Zillow website. We live in Washington state.

We're considering filing because our bills are more than our income now.
Gross annual income $65,000
Myself, husband, 21yr old daughter, and 19 yr old son live at home
Hoping to keep 2009 car that we purchased last summer with cash for clunkers deal ($4000)along with money we received from an insurance company of the jerk who hit & totaled our paid for 2001 Van , $4400. We had $8400 to go towards new car we cant afford, but payments are only $150 a month.
Also have 3 very old cars as well
We've made no large transfers between cards, or purchased any luxury items. I have been buying gas and groceries with cards for about a year now.

I wasnt aware you can ask for free consultations, I thought you had to pay an attorney for advice.

[momofthree]

$82422 is the median income in WA state, so you're below median. What this means: you would most likely qualify for a chapter 7. If you go the ch.13 route, then you have the option of a 3-year payment plan.

Here are WA state exemptions: http://www.bankruptcyinformation.com/WA_exemp.htm

which states that you can exempt up to $40k of equity.

You may have issues with your vehicles as the max equity you can exempt in a car is $5000 for a married couple. There is a $2000 wildcard exemption as well that you could put towards the car(s).

[momofthree]

Keep in mind, in a ch 13 you can keep pretty much all the property you want, you just have to pay at least as much to your unsecured creditors as they would get in a ch 7 liquidation.

Soooo...you'd have to pay $16k in the non-exempt home equity, plus the value or any other non-exempt assets.

IF it's just the $16k, then your minimum that you'd have to pay each month would be:
3-year plan: $445 + attny fees + trustee fees
5-year-plan: $267 + attny fees + trustee fees

Keep in mind, this is just the MINIMUM. If your dmi is higher, than you'll pay the higher amount.

[momofthree]

Do you have any money available on your home equity line of credit? You may be able to use some of it and convert that non-exempt equity into an exemptable asset (like retirement funds...) Speaking with an asset protection specialist (lawyer) may be beneficial.