Can I file Chapter 7?

[deric203]

Current situation:
98,000 annual income
4 persons in household
primary mortgage -240,000 current value-$90,000
three investment property mortgages- 92,000 current value-$40,000
unsecured debt- $48,000

Investment property are causing a loss $1500 per month.
Total monthly income-$8166
Total monthly expenses including documented loss on investment property- $9271

Can these underwater, money losing properties be included in monthly expenses while taking the means test?

Mortgage was refinanced 6 years ago with a cash out of 100,000. This was spent on home improvements, investment properties and a lot of waste (I ate good for a couple years and had a couple nice vacations.) Dumb, Dumb, Dumb. I know.

Income has been reduced from 134,000/yr to the current 98,000/yr.
I have never been late on any payments. To the point now that missed payments will be inevitable.

Thanks for any help

[deric203]

This is in Nevada

[NoMoreCards]

For the best answer, call a few BK attorney's and go in for their free consultation. Qualifying for a Ch. 7 is based on the means test which puts your income against your expenses. It also is not recommended for someone with assets to protect. If you do the means test and have what they determine to be "disposable" income, then you may have to file a 13.

There is a free online means test somewhere, I just don't have the link. However it would give you a idea of where you stand. I don't know the specifics of what can and can not be included in the means test, as my attorney handled all that for me.

I wish you the best.

[deric203]

Thanks for the response.
Have a meeting with attorney in an hour.
Seems that there a quite a few real estate investors falling into this same situation.
I'll update my progress.

[momofthree]

If your properties are losing money and you're that underwater on them, you'll most likely need to surrender them in bk. No way is the trustee going to allow you to keep shelling out $1500 a month to an upside-down "investment" when that money could go to creditors instead.

So, if you surrender the properties and no longer lose that $1500 a month, then your expenses will then be $7771 (assuming that all expenses are allowable), which gives you a dmi of $395, which will probably push you into a 13.

As always, consult with an attorney.

[deric203]

Momofthree,
I can skip the attorney and hire you. You nailed it. The properties wont be part of my expenses. A quick assessment will have me paying more than $1,000 per month to creditors. Thats fine as I am paying a lot more than that to barely keep my head above water.

Attorney provided a ton of information and answered all of my questions. I walked out and probably am more confused about the whole process than before I met with him.

Have always payed every bill on time. Have been confident about my finances till recently (In hindsight confident= cocky). The idea of Bankruptcy makes my head spin.

[deric203]

Forgot one little detail.

I'll be moving my heartburn story to the Chapter 13 threads.