Chapter 7 and non consumer debt

[skrletroze]

I was in a bad relationship. We broke up and we are both on the mortgage for 500K (3500 monthly) mortgage on home he and his wife and kids live in and vacant investment property 250K (2000 monthly). I'm up to date on 250K mortgage payments but am unable to cover the other half of the 3500 monthly payment. He can't refinance with wife because his credit is bad and he only pays mortgage when he gets threatened with foreclosure. He refuses to short sale land.
I will be moving due to work and the cost of housing is 85% higher where I will be moving to. I will have to rent because I have too much debt and have no savings but the lowest rent I could find in a safe neighborhood is 2500 month. The current apartment my daughter and I live in is so tiny! I sold my home with a loss of 130K and had to borrow money from brother, sell off furniture and pull out all savings to cover the difference since home was worth less than owed. Despite all this, my attorney told me I'm not eligble for a chapter 7 even though I read that the means test doesn't apply because it is non consumer debt. Said there is nothing I can do but continue to pay. I've spent so much in attorney fees for consultations only for them to tell me I'm in a mess. I'd like to hear something different. Thank you!

[biotechsolution]

if it's just he investment property you have to 250K (half of it), even if it was only yours you wouldn't qualify if half of the 500k mortgage is yours. Your personal debt would be over 50 percent.

[justbroke]

Despite all this, my attorney told me I'm not eligble for a chapter 7 even though I read that the means test doesn't apply because it is non consumer debt.

I don't read anywhere in your post that you have more than 50% of non-consumer debt. In fact, your $500K primary residence is what's killing you and what prevents MOST debtors with investment property from filing a non-consumer case, because their primary residence usually far exceeds the value of their investment property.

Sorry, from what I read, your attorney is correct.

There is no use trying to divide up the mortgage in "half". You are equally responsible for the promissory note (and mortgage). From what I read, it's $500K at least of personal debt not including credit cards and/or student loans. Then it's only $250K of an investment property. That's only 33% "non-consumer" debt. Additionally, if you can't prove that the "investment" property wasn't purchased as an investment property and not a second/vacation home -- by producing the rider with your mortgage stating such -- then it is not an investment property. It is based on what you purchased it for originally, not what you used it for or use it for now.

[skrletroze]

Thanks for the quick response. I was under the impression that investment property was considered non-consumer debt. I consider the 500K home investment property because I never lived in it nor had an intention of living in it because my primary residence is 1 mile from the beach. The intention was to sell the 500K home after it was built and make money but the market tanked. The house is only 12 miles away from my primary residence so it would be strange that the home built would be considered a second/vacation home. We were going to do the same with the other vacant lot. Build on it and sell it. Is there something I can reference to see how they classify property as consumer and non-consumer? Because he, his wife and kids live in the home, I suppose it's considered consumer even though it was meant to be sold after it was built. I got hustled and am trying to remedy this mess I'm in.

[angles]

What about on your taxes, does it state somewhere that it is investment property? I take it you received no income from the investment property?

[skrletroze]

Interesting, my tax preparer never said anything about the vacant properties I had as investments. I'll have to go back and see about re-filing. My primary home is 12 miles from the vacant lot and the 500K home. The 500K home was vacant for a year because the ex wanted to rent it out for too much therefore there was no income. He lived in another state and I lived in my primary residence.Nothing can be gained income wise from the vacant lot. I actually considered living in the house but I got threatened and he changed the locks and the codes!

[newbie2]

Thanks for the quick response. I was under the impression that investment property was considered non-consumer debt. I consider the 500K home investment property because I never lived in it nor had an intention of living in it because my primary residence is 1 mile from the beach. The intention was to sell the 500K home after it was built and make money but the market tanked. The house is only 12 miles away from my primary residence so it would be strange that the home built would be considered a second/vacation home. We were going to do the same with the other vacant lot. Build on it and sell it. Is there something I can reference to see how they classify property as consumer and non-consumer? Because he, his wife and kids live in the home, I suppose it's considered consumer even though it was meant to be sold after it was built. I got hustled and am trying to remedy this mess I'm in.

Take a look at the mortgage & note that you signed at closing. If it was an investment mortgage there would be a rider or something stating that it wasn't for your principle residence. Also, if it was a normal consumer loan there would have been language in the mortgage & note stating that you intended to live in the property as your principle residence.

My guess would be that it isn't non-consumer. An investment mortgage (non consumer) normally has higher costs associated with them, and also more documentation.

[skrletroze]

Thanks for being patient. I've lived in my primary residence the entire time with no intention of living in the 500K house because it was supposed to be sold. I've since sold my primary residence at a loss and am moving to another state. At this point looks like my only option is a Chp 13? Will I have to pay an outrageous amount each month to pay the creditors off for the next 5 years? Might be worth it just to cut the ties with the ex and not worry about a credit hit every month because he keeps missing payments! Or am I stuck with the loan and his family for the rest of my life because he and his wifes credit are so bad the loan can't be refinanced/assumed or modified. He has no intention of selling, won't sign off on a short sale on the vacant lot and no buyer will buy the home if it goes into a partition because it is worth way less than what is owed.

[justbroke]

As posted, please check your mortgage to see if there is a "Investment Property" or "Non-Primary Residence" Rider. It's likely that you have a "Second/Vacation Home" Rider and/or language (or an additional rider) stating that it will be your primary residence and you intend to move into it.

You can usually tell because an investment property usually requires 10-20% down payment. If you didn't put down 10-20%, it's probably not an investment property.

I'll add that if you could prove otherwise that it was an investment and that you lived in the home at the beach, and you never occupied that "investment" home for at least 6 months to a year, you may be able to "argue" your case. However, it will be just that... an argument and fight.

[skrletroze]

Thanks so much for the advise. I'll try for a Chapter 13 and surrender all the property and pay the deficiency.