Should in-laws file?

[sahaley]

My husband and I filed a ch 13 2+ yrs ago and, although money can be tight, its been a very good decision.

Recently my father-in-law has become quite ill and my MIL is discovering bills she never knew about. They have alot of credit card debt, are paying on 2 car notes and are significantly upside down on their home (possibly cars too). Their home is worth (estimate) 200k and with 2nd mortgages, home equity etc - they owe 250k+. I am estimating the #'s as I do not know all the details.

My MIL has a retirement account (50k) and works part-time and my FIL takes in a SS check (?$). Their monthly income is probably <3000/mo.

Not sure how a ch 7 works but is keeping the house and option and/or vehicles? They also have a small camp/trailer and boat that are not worth much if anything at all but I know would be considered an "asset" and liquidated... so should she put these in one of her children's names?

Any advice is appreciated.... thanks!

[backtoschool]

Make sure she does NOT transfer any assets to her children's names. That is a red flag and is considered a preferential transfer and will be taken by the trustee anyway.

Your MIL sounds like a good possible candidate for chapter 7. She will be able to keep the house if she is current, but she will have to prove she can handle the payments. In a chapter 7 you cannot strip the second mortgage, so there would be no real benefit to her keeping the house if it is that much under water, versus her moving to a place where she can afford monthly rent.

[iv65536]

Your MIL will need to consider the decision with respect to the house in deciding whether o go 7 or 13.

Assuming this is a 7, if the trailer/camper and boat really are worth very little, the trustee will be more inclined to abandon; after discharge, they could then be transferred. But if you can't exempt them, and the trustee wants you to buy them back, then I would make the trustee try to sell them.

[sahaley]

Thanks for your replies... so if it went to a 7 - and she is current on everything except cc's... - she could continue to pay her mortgage, home eq. and 2nd mortgage? As well as her car note? It sounds reasonable as far as the abandon thing... particularly for the camp... its definately no sell-able... the boat might be tho....for a small amount. What if she sold it to my brother in law now and filed in a year or so... he is the one that uses it and gets it registered each year... ? Its technically my FIL's but he is too ill to use it anyway and likely will not be able to in the future.

So the benefit of going to a 13 is that the 2nd mortgage could be stripped? She is very set on staying in the house - even though it may not be the best decision financially....

[sahaley]

She is also concerned that they will seize her retirement account... she currently draws on it occasionally.... not sure what type it is...

[backtoschool]

Retirement accounts are exempt, as long as they are IRA or 401k type accounts and not regular non-tax-exempt bank accounts.

Yes, the advantage of a chapter 13 is that the second mortgage can be stripped. Your MIL can keep the home in a chap 7 as well as a chap 13, but in a chap 7 she will still be responsible for the second mortgage, whereas in a chap 13 there is a possibility of the second mortgage being stripped as part of the plan.