2nd home? or 3rd home?

[chinup]

Curious if a second home with a renter in it can still be entered into a Chapter 13 if the 1st mortgage is still more than the current value and it has a 2nd on it as well.

Also, a 3rd home which was financed with friends? How will that be impacted?

Above is actually for a friend, not myself, as I am having trouble with just mine and will be filing shortly.

[momofthree]

The investment property must be producing income in order to keep it. If it produces monthly income (rent - mortgage - maintenance = profit), then you can keep it even if it's upside down in value. If the 3rd home has a properly perfected lien against it and it also produces income, then it can be kept as well. If the 3rd home does not have a properly perfected lien, then it will be sold and the proceeds disbursed among your creditors.

[chinup]

The investment property must be producing income in order to keep it. If it produces monthly income (rent - mortgage - maintenance = profit), then you can keep it even if it's upside down in value. If the 3rd home has a properly perfected lien against it and it also produces income, then it can be kept as well. If the 3rd home does not have a properly perfected lien, then it will be sold and the proceeds disbursed among your creditors.

Thank you, from what I understand the 2nd home generates negative cash flow a month, to the tune of $800 or so! WOW. He has a lot of pride, I told him to dump it long ago. What I could do with an extra $800 a month. LOL. Also, the 3rd home is a vacation home.

[justbroke]

Curious if a second home with a renter in it can still be entered into a Chapter 13 if the 1st mortgage is still more than the current value and it has a 2nd on it as well.

This is not even a question for me. You should surrender this property in the Chapter 13. No question about it. It's a very poor business decision to continue to do so. (Not that I need to mention this, but the reason is that you would HAVE to either pay off the value of the property or pay the first and second mortgage during the Chapter 13. You'd also have to either make enough from rent or pay the difference by contributing the same amount to the unsecured creditors. This is almost impossible for most Chapter 13 debtors. An underwater non-primary residence should not even come into question about retaining or surrendering the property.)

Also, a 3rd home which was financed with friends? How will that be impacted?

You will be discharged of the debt and they will still need to pay it.

Also, there could be issues of bad faith if you try to keep these worthless homes.

[chinup]

I guess you did not read where THIS IS NOT ME! Just curious for a friend, I have my own issues. But thanks for posting.

[justbroke]

I did read, but my answers are always direct. I placed you in the shoes of the debtor. Please be aware that I speak from personal experience on this particular issue.

The information remains the same regardless of which preposition used.

[chinup]

OK, as I about to file on my own home, I was curious how someone could go out and buy a 45k SUV weeks ago, and retain that, a boat, and a paid off car, and still hold onto 3 homes. Not saying I want the worse for them, just curious if the law was that forgiving on bk proceedings.

[justbroke]

Yes, the law can be forgiving! If they own multiple properties, then they are more than likely "non-consumer" like myself. They can actually title the vehicle as part of the "rental" property business and even have pretty significant residual income leftover each month, and still qualify for a Chapter 7.

Personally, I filed Chapter 7 (conversion from a 2 year old Chapter 13) as a non-consumer debtor. I owned two non-homestead properties at the time. However, I actually passed the Means Test, although it's not required for non-consumer cases.

In California, the unused homestead exemption under System II (System 2) is phenominal with over $21K of exemptions per debtor (husband and wife double). If they don't have a primary residence, or are surrendering it, a married couple would easily have $42K in wildcard exemption, not to mention all the other exemptions.

Bankruptcy is not what everyone thinks it is. The overwhelming majority of people, some 90%, keep all their belongings! Bankruptcy is not about losing everything. It's about liquidating your non-exempt assets and, again, the majority of people have no non-exempt property.

As for buying a $45K SUV, it's secured debt and treated much differently in Bankruptcy.

[momofthree]

h

In California, the unused homestead exemption under System II (System 2) is phenominal with over $21K of exemptions per debtor (husband and wife double). If they don't have a primary residence, or are surrendering it, a married couple would easily have $42K in wildcard exemption, not to mention all the other exemptions.

Just as a small correction for those filing in CA. The exemptions do not double for joint filers. They are what they are whether you're filing single or jointly. That said, they are still quite generous!

[justbroke]

Oops mom, thanks for the correction. I'm always thinking Florida... we get to double our measly $4K or $1K.

[Mom2Grlz]

Just curious as to this post... I myself, is in process of starting a Chapter 13.. I am surrending a second home here in FL, and obviously keeping my primary.. plus vehicles. What exactly is considered "non-consumer debt" in which you talk about... Our attorney told us we don't qualify for 7, I even did a means-test from a link I was sent from my thread... It also said I failed the test.

Other than the Rental Property which has no income coming in & is completely upside down. Are credit cards which hardly total $15k. What is the Wildcard for?

Since you went through this in FL, I was wondering if you could give me any advise.

Thanks!

[justbroke]

Generally, those that own a personal residence won't qualify, but here it goes. If the total of non-consumer debt exceeds 50% of your total debt, then you can file a non-consumer Chapter 7. What constitutes non-consumer debt, is all debt that is not purchased for you or your family. Income tax is non-consumer debt. A vacation home is consumer debt.

So, for most, the primary residence is usually the most expensive investment and that is usually why even those who purchased investment properties, end up in consumer cases. If you failed the means test, then you failed the means test, which means you have enough money left over, after allowed expenses, to fund a Chapter 13.

A wildcard is for exempting personal property, such as your furniture and clothing.