Is Chapter 7 Possible for me?

[stressedinTN]

My only source of income is Social Security Disability. I ended up using credit cards just to try to make ends meet because I had such massive on-going medical bills. I hadn't realized how bad my financial situation was, but now our credit card debt is about half my income. I don't know how I ever could pay it. A few questions.

First, TN gives me a $25000 homestead exemption because I have minor children. (I'm raising my kids on my own.) I paid $150,000 for hte house and owe $143,000. My property tax value is about $163,000, and Zillow lists it as valued at $180,000. How would the homestead exemption work here? My kids have been through such an enormous amount of stress I really don't want to have to move. I planned to reaffirm the mortgage.

Asset-wise, we have nothing of any value. I have a car that I almost 7 months from paying off with a car loan through the credit union. It's a 2004 with about 144,000 miles.

If Chap 7 would make me lose my home, does anyone know of any other options?

Thank you.

I'm really stressed and overwhelmed.

[LadyInTheRed]

You need to find out the actual market value of your property. Get an appraisal or a brokers opinion ov value. If Zillow is accurate, which it often is not, you risk losing your home in a Chap 7. If the assessed value is an accurate indication of market value, which wouldn't be the case in my state because the increases in assessed value are limited by statute so are usually lower than the market value, you have enough exemption to keep the home.

If you have equity in your home, your option would be to file a Chap 13 with a plan payment that would be at least equal to your non-exempt equity divided by the 36 to 60 month plan length plus enough to pay trustee fees.

Do not reffirm your mortgage! You do not need to reaffirm to keep the home.

Please consult with a couple of bankruptcy attorneys. Most give free consultations.

[stressedinTN]

Thank you so much for your response. So do I understand correctly that if I have say 12,000 from the house that isn't exempt, then I need to be able to pay $12,000 + trustee fees over 60 months + trustee fees? I'm confused because I"ve read other posts about income-expenses and not needing to worry about the percent that is repaid. Or are they referring to what would cover non-secured debt.

Do appraisals and broker opinions cost? Do you have ideas on where to get them?

[LadyInTheRed]

In a Chap 13, you must pay all of your disposable income (income minus reasonable and necessary expenses) to the plan or you must pay 100% of all unsecured claims. Unless your disposable income is high enough to pay 100% of unsecured claims, the percentage paid to unsecured creditors doesn't matter. For your plan to be feasible, it must satisfy "the Chap 7 liquidation test": During the life of your plan, the unsecured creditors must receive at least what they would receive if you filed Chap 7 and the assets were liquidated. So, if your plan doesn't propose a payment high enough to do that ($200 plus trustee fees in your example), the trustee will object to confirmation of the plan. If your schedules show that your disposable income is only $150 per month, but your plan has a $200 per month payment, the trustee will object to your plan. So, calculation of your disposable income, is step one. Checking to make sure your disposable income is enough to present a "feasible" plan, is step two. If you fail step two, you have to work with your budget to make your plan feasible. But, if the trustee sees your expenses are too low, he still might object to the plan. If they are too low, but the plan is confirmed, then you are going to have a hard time completing the plan. There are other minimum amounts that must be paid in a plan that may or may not apply to you. If you have more questions about Chap 13, please post those in the Chap 13 forum.

In my neck of the woods, appraisals cost several hundred dollars. You should be able to find real estate appraisers in your area with an internet search. You go to a real estate broker for a broker's opinion of value. If they think you are interested in selling your home, they may do it for free, but they may estimate high because they are trying to get the listing. If you tell them why you need the opinion of value, they may charge you. I don't know how much, but it shouldn't be nearly as expensive as a full appraisal.

[stressedinTN]

Thank you so much!