Can I keep house under a Chapter 7?

[Quagmire]

I talked with a BK attorney (a free consultation at my local community center) and he told me that if I want to keep my house, I must file a Chapter 13 AND show stable monthly income. He did not see under my circumstances, that I could file a Chapter 7 AND keep my house. The bad thing is, B of A is my mortgage company. I am two months behind on my mortgage (but have been current on my mortgage for 38 months), but I think I can get totally caught back up on it in the next 30 days. However I am about 120 days behind with 4 of my B of A credit cards, with a total of about 40K I owe on them. Plus I owe over 50K more in other credit card debt. Yet seeing that B of A has both my mortgage and my 4 credit cards, I can not see them letting me file a Chapter 7 without foreclosing on my house as well.

Yet the attorney said that I would have to make at least $3,500 per month (stable income) in order to file a Chapter 13 AND keep my house AND do a 3 to 5 year payback plan.

Yet as I ponder my problem, I was just curious if anyone has filed a Chapter 7 and managed to keep their house? If so, basically what did you have to do in order to do it?

Quagmire

[Anon]

I filed 7 and also had b of a as mortgage co AND had line of credt with them for $15K unsecured. I kept my house and two cars. 15K dismissed. Get a new Attorney.

[Freddy03]

I may be wrong (I'm still figuring this stuff out....lol) but if your BoA credit cards are not secured cards stop paying them and catch up on your mortgage then file Ch 7 when you are less than 30 days late.

BoA can't foreclose on your house if you are late on your credit card payments. The worse they can do is sue you and it takes a few months.

Good Luck!

[LoadedGuns]

Filed No Asset Chapter 7 in October 2005. First & Second Mortgage was included never reaffirmed. Still own house and never been late.

[catleg]

What is your income and state of residence and household size? If you are below the median income for your state and household size, you can file chapter 7 on the credit cards and keep the house, assuming you can afford the payments. You may even be able to file chapter 7 if you have legitimate expenses and are above median. Chapter 13 is mainly for folks who are way above the median income, folks with tax issues, and folks with mortgage arrearages who want to keep the house, and folks who want to strip off a 2nd (or higher) mortgage lien. It would be very rare for there to be a linkage (cross-collateralization) between your credit cards and house, possibly if you had a mortgage from a credit union.

[HHM]

The key here, the OP, said she was already 2 months behind on mortgage. In that sense, the attorney's advice is accurate.

The bottom line with chapter 7 and keeping the house.
Most conservative approach: you MUST be current and caught-up on the mortgage prior to filing chapter 7.
If you are behind on payments and file chapter 7, you are giving the power to the bank to decide whether it wants to let you keep the house. There is no mechanism in chapter 7 to force the bank to bring you current.

Hence, if you really really want to keep the house and cannot get current, the only option is a chapter 13.

The fact that BofA has 4 of your credit cards is largely immaterial.

[catleg]

Assuming you are below median you would have the choice of a ch13 but assuming you can get caught up and stay caught up on the house you would be much better off with a chapter 7.

[Quagmire]

OOPS!!!

Thanks Everyone!

In my haste yesterday, I forgot to mention that I live in California (near Los Angeles). That bk lawyer stated that I have too much equity in my house, so even with the poor economy and the poor housing marking being very down nowadays, he feels that there is enough equity in my house to pay off my creditors if my house was sold. As I have over 100K of revolving unsecured credit card debt. Thus is why he said that a Chapter 13 is the only way that he could see that I could keep my house (as long as I had enough monthly income to satisfy the mortgage, my annual living expenses, AND doing a 3 to 5 year payback plan with my creditors). Otherwise if I tired to file a Chapter 7, the court would force me to sell the house to settle my debt with my creditors.

Since I am 47, he said that having a homestead on my home would not help in my situation (he thought you have to be over 50 in order to get a better deal on a homestead here in California), yet a homestead would partially help if I sold my home to satisfy my creditors.

Everyone, this may be a crazy idea, but can I quitclaim my deed to my brother (who already lives in the house) and let him make the mortgage payments. Then I can just file a Chapter 7 and be done with my bk mess so I can start over? Or will my creditors see that I gave away a valuable asset that they could have settled my debt with them, and try to sue me anyway? Yet unfortunately, by brother has bad credit, so he would never qualify for a new mortgage or a re-fi at this time, yet I was wondering would I be able to save my house by using a quitclaim deed in some way?

In my financial circumstances right now, I think I can catch up on my mortgage and keep it up, and keep up with my annual living expenses . . . yet trying to payback 100K+ in 3 to 5 years seems impossible.

Yet I just received a certified letter from B of A yesterday telling me that if I do not catch back up on the 2 mortgage payments that I am behind in (within about the next 25 days), they are going to start the foreclosure process.

Quagmire.

[HHM]

OOPS!!!

Thanks Everyone!


Everyone, this may be a crazy idea, but can I quitclaim my deed to my brother (who already lives in the house) and let him make the mortgage payments. Then I can just file a Chapter 7 and be done with my bk mess so I can start over? Or will my creditors see that I gave away a valuable asset that they could have settled my debt with them, and try to sue me anyway? Yet unfortunately, by brother has bad credit, so he would never qualify for a new mortgage or a re-fi at this time, yet I was wondering would I be able to save my house by using a quitclaim deed in some way?

Quagmire.

If you want to absolutely LOSE your home, then you would do that. Don't forget about fraudulent transfer. The trustee can undue any transfer of assets that was made fraudulently. You quitclaiming the home to anyone, (especially a family member) is the very definition of fraudulent transfer under the circumstances.

No easy option here when you are asset rich but cash flow poor. The attorney sounds like he is on the ball, if you have non-exempt equity, the only option you have is a chapter 13.

[tcreegan]

Hello quagmire,

Not only is it a crazy idea, it is also highly illegal......

The homestead thing in CA....there are two systems used to exempt property from the BK. System 1 is for people who want to exempt a bunch of home equity, system 2 is for people who don't have much home equity and want to exempt extra personal property. You would be using system 1....

Single; you can exempt up to 75K of home equity
Family: you can exempt up to 100K of home equity
At age 65 and over; you can exempt 150K home equity

This is probably the age issue the lawyer was talking about. The only other age related change is for folks 55yrs or older making less than 15K annual income

To file a Ch 7, the median income for CA is around 50K for a single person, around 80K for a family of four.

So, for you to file Ch 7, is your income somewhere close to 50K? Is your home equity somewhere close to 75K?

Keep shopping for lawyers, educate yourself a little on BK basics so you can ask some specific questions, and keep looking until you find an attorney who is a good fit for you. Remember the old saying...you have to kiss a few frogs....

Tom in Colo

[Quagmire]

Thanks HHM, and Tcreegan. I appreciate your good and sound advice. Since I am so stressed-out over my gloomy financial situation, sometimes I get crazy ideas. Yet it is good to have another set of eyes to view my situation to try to make sure that I do not do something totally stupid. LOL!!! So I appreciate your help and your want to keep me clear of causing new and more horrific troubles than I am enduring now.

Thanks so very, very much your two!

Quagmire

[Cristo]

As others have said, you should talk to more attorneys, you will be suprised at how different their opinions can be. You might want to try to get a better idea of the valuation of your house. If I'm reading things right....the lawyer thinks you have $100,000 in equity in your house. If you can exempt $70,000 in CA then you are not that far off. You could probably get an appraisal that would show you with less than $70,000 in equity if it's done right. You need an attorney that is experienced in high asset cases. Many people have to talk to 5-6 attorneys before they find the best one for them. Consultations are free. Do a lot of reading on this site or get NOLO's CH 7 book and read up so you are ready. They get easier after you have done a couple.

If you do get stuck in a CH 13, you should not have to payback the whole $100,000k, just the amount that your creditors would get in a ch 7. So, again, if I'm thinking right, say you do have $100,000 in equity.....if you can exempt $70,000 that's only $30,000 that your creditors would get in the ch7. That would be spread out over the ch 13 plan.

If you have $170,000 in equity then yes, you are in a tough spot.

If your brother lives with you and he could be a dependent (I think you have to be able to claim him on taxes) then maybe you could be a family of 2 and get more exemptions.

[Quagmire]

Thank you very much Cristo for your detailed help, I appreciate it very much.

I will printout your comments and suggestions and add them to my notes. For sure, what you have expressed will come in very handy in the next few weeks.

Thanks a MILLION!!!

Quagmire