Question about property appraisal

[Ann]

All, I will try to make this as simple as possible... I have posted that my attorney says at this point we cannot file a chapter 7 or a 13. The 7 because of too much income and the 13 because of too much unsecured debt...$219,000 and a $68,000 2nd mortgage. I noticed that looking at a draft of the petition he was going to file that he had my property listed as having the state equalized value and using that number instead of doubling it which is what I always thought you were supposed to do. I questioned him and he said he always just uses that value. So because my SEV is 101,000 and my 1st mortgage is $193,000 that leaves me with what he says is having more unsecured debt. I have zillowed (I know they can be way off at times) my home and the value is listed as $207,000...If this is the case then I am not as underwater with my first mortgage and therefore that shouldn't be added to the unsecured portion of my debt, right??? I am so confused here. He said he would gladly use the higher value if I got the house appraised and therefore I would fit into at least a 13... Does any of this sound right??? Please anyone speak up and give me some input here.

[Amy26]

Wait... he's putting your negative equity in your home into your unsecured debt? Unless I read that wrong... My home was over 150k less than what I owed on it and that definately was NOT included in my unsecured debt. Otherwise I would have been way over as well. We also used the zillow valuation on my home too I think... or just comparable sales... not sure. But I didn't get my home appraised.

[Ann]

Yes, that is exactly what he did!!!

[Amy26]

I can go back and re read my bankruptcy papers but I am almost 99% sure my negative equity was not included in my unsecured debt... its not yours (my) fault that our home is underwater and that does not make it unsecured just because its not worth what you paid for it. The loan is a loan is a debt... its a mortgage...so its secured. Whether the bank takes a huge loss on your loan is not the business of the bankruptcy court... In my opinion anyways...

Someone else can chime in here but I'm sticking with my original recommendation of FIND AN INTELLIGENT LAWYER! Cause that one sounds like a dildo...

[miindebt]

The sev in MI should be doubled.

[Amy26]

Oh... maybe the bk laws in your state are different... is that negative equity thing in the unsecured debts a district thing?

[keptdigging]

I think your lawyer is right.

There have been court rulings that the underwater portion of a mortgage is indeed unsecured and can disqualify you from a Ch13.

In the case of Amy26, could it be that no one looked at it carefully or cared, since you were a Ch 7? (The limits on unsecured debts are for qualifying for a Ch 13--Ch 7 has no such limits.) You also may have predated the rulings. I know I should google and find the case but I'm feeling lazy.

[newbie2]

Ann, I went back to one of your earlier posts where you detailed the amount of the first & second mortgages as well as the SEV on your home.

The attorney most certainly should have doubled the SEV to get the city assessors market value of the home.

If you go by the city assessors numbers it appears that your home is underwater by only $58,000. (Adding first and second mortgages, subtracting assessors value). If you add the $58,000 to your "regular" unsecured you still come up under the limit.

If I were you I would call a real estate agent and ask him/her for a market analysis of your home. Have this with you when you make an appointment for the next attorney.

[newbie2]

I think your lawyer is right.

There have been court rulings that the underwater portion of a mortgage is indeed unsecured and can disqualify you from a Ch13.

In the case of Amy26, could it be that no one looked at it carefully or cared, since you were a Ch 7? (The limits on unsecured debts are for qualifying for a Ch 13--Ch 7 has no such limits.) You also may have predated the rulings. I know I should google and find the case but I'm feeling lazy.

In Anns case the attorney should have doubled the city assessors SEV. Our state is an odd ball one...the SEV on our property tax statements shows 1/2 the city assessors value.

Frankly it astounds me that an attorney that practices in the state doesn't know that. Had he valued the home correctly Ann would be under the unsecured limit.

[Amy26]

Oh that's just for a 13...my bad. I was confused cause in another post Ann said she wouldn't consider a 13.

[Ann]

newbie2, yes, thank you. I have approximately $10,000 equity in first and zippo when you add the $68,000 for the second... so yes, $58,000 (or around that) is about what I am underwater for. He said he always uses the SEV and it was never a problem BUT obviously nobody has ever been this close to being able to file or not file for a 13 for him to dig a little deeper AND that in itself brings me to the question of... just how much experience in chapter 13 does he really have???? I cannot believe I am the only debtor that has experienced this. So glad I caught it. No, I do not want a 13 and I will wait (AGAIN) to see if I can get my income down ( I own a very small business so that MIGHT be a possibility) and try for the 7 but if those lawsuits start to pop up at the very least I would have the 13 to protect me, right?

[newbie2]

newbie2, yes, thank you. I have approximately $10,000 equity in first and zippo when you add the $68,000 for the second... so yes, $58,000 (or around that) is about what I am underwater for. He said he always uses the SEV and it was never a problem BUT obviously nobody has ever been this close to being able to file or not file for a 13 for him to dig a little deeper AND that in itself brings me to the question of... just how much experience in chapter 13 does he really have???? I cannot believe I am the only debtor that has experienced this. So glad I caught it. No, I do not want a 13 and I will wait (AGAIN) to see if I can get my income down ( I own a very small business so that MIGHT be a possibility) and try for the 7 but if those lawsuits start to pop up at the very least I would have the 13 to protect me, right?

I'm still shaking my head that he used $100,000 as the value (because of your property tax statement) instead of $200,000 which is the assessors value.

Yes, by all means, if you can wait on filing to get your income lower that is probably best. I wish we had done that in hindsight.

If you do have to file sooner than you would like I hope you are going to consult with a different attorney!

[SMinGA]

On the bright side, it no longer seems your atty doesn't know how to use a calculator... Just seems a little ill-informed. (Based on the comments here, I personally know nothing about home valuations in other states.) The debt #s you have posted made no sense for the 'too much unsecured for 13' claim. At least you know WHY he thought that?

Getting an actual CMA of the home seems like a good idea. And since the house may be worth more than the 1st mortgage, you have more incentive now to keep fighting for a ch. 7. (In a 13 you'd have the ability to strip the 2nd. If it were fully unsecured.)

I am not sure the logic though in counting the under-water portion of a 1st mortgage as unsecured? I guess technically it is - except its one loan. There are no 'cram down' provisions on houses. But I guess if you were to walk away from the house in a BK it would make sense to count the unsecured portion (since the bank can't be expected to recoup the full balance in a foreclosure sale ). I wonder how they would handle it if you intended & did reaffirm?

[Ann]

SMinGA, the whole problem here is that technically there is no underwater portion of the first mortgage. This lawyer on Monday morning told me some pretty devastating news and to be told I couldn't even file a 13 made me feel completely helpless. For this I'm extremely angry. He should have allowed me to look over his petition first and ask me how it looked and the mistake could have been caught and maybe we could have gone from there. Not call and say sorry no 7 or 13 because you have too much debt. What a nightmare!

[newbie2]

SMinGA, the whole problem here is that technically there is no underwater portion of the first mortgage. This lawyer on Monday morning told me some pretty devastating news and to be told I couldn't even file a 13 made me feel completely helpless. For this I'm extremely angry. He should have allowed me to look over his petition first and ask me how it looked and the mistake could have been caught and maybe we could have gone from there. Not call and say sorry no 7 or 13 because you have too much debt. What a nightmare!

Ann, just because the city assessor says your house is worth $200,000 (an example) doesn't mean that it is. Many cities / township assessors are cutting values because of the current market, but they are not cutting it enough to reflect accurate current market value. Heck, if I could sell my home for what the city assessor states the value is, I would have a for sale sign in my yard within minutes :-)

This is another reason why you should get a market analysis by a real estate agent in your area. Your property value may be under your first mortgage balance, and you may be able to strip that 2nd. If you are going to be in a 13 you may as well go the distance and get every benefit from it that you can.

Edited to add: Do not rely on Zillow for accurate numbers. Zillow uses public recordings for their information. They will pull in foreclosures and refinances and other data that does not reflect anticipated sales prices. (For example: If your home was foreclosed upon Zillow would show $200,000 as a "sales" price and it would be used in their comparable analysis. However, the home could be worth only $150,000 in true market value.) Zillow currently has my home overvalued by $35,000. Quite a bit of a difference on an under $150,000 house.