Parents don't Believe ch. 7 is for them-I'm not so sure.

[tobee43]

I agree with you Tobee that planning/waiting can be the right choice for some filers. But in this case, Dad is already 78 and I'm not sure he has ten years to wait in order to bypass the self-settled trust question before filing. If the opts for the two year wait after moving some money into an annuity/life insurance vehicles, they could lose the benefit of it if fraudulent transfer was suspected. Moving all of one's assets out of the non-exempt sphere into the exempt sphere is enough to make that determination. Move some of them and leaving some, is less obvious. I don't disagree with you, Tobee. I think I'm speaking to a different aspect. Mostly giving him something to think about as he does a risk assessment on his parents' behalf.

i hear you deb....but unfortunately, depending on where they are they have to wait the two years. really....or they will lose most all they have. you are still allowed to have a 401....but it's so obvious when you make that move.

we are old...LOL!!!!...and waited...and i now feel 20 years younger!! i can only communicate our personal experience and how it worked for us. at 78 having a mortgage over 400k....well that says it all to me...really.

it most surely is a personal decision....if one wants to work their entire life and turn it over i say go for it....if they want to take their time, because they can, i say go for that as well.

each situation is different. i personally would wait until i could wait no longer...it's only one opinion and deb...you know what they say bout those!!! LOL!!!!

[debee]

The look-back period in Arizona is 4 years. I'm seriously interested in finding out if the debtors would get away with moving that much cash before filing. I posted the question in a different thread.

If the HELOC was not purchase money, I wonder if the parents had to reveal details of their financial life to the lender before getting the heloc. We had a HELOC and we had to provide info on income, assets, etc to get it.

Then I wonder if that lender could raise the question at a ch7 341 meeting which would prompt the trustee to investigate.

So I hope someone who knows will step in to this thread or the other and share their knowledge. I don't have any cash to hide, but I still wonder.

[debee]

Abe - there's also the tax implication of any forgiven amount unless it discharged in foreclosure. Let us know what you end up doing!

[tobee43]

The look-back period in Arizona is 4 years. I'm seriously interested in finding out if the debtors would get away with moving that much cash before filing. I posted the question in a different thread.

If the HELOC was not purchase money, I wonder if the parents had to reveal details of their financial life to the lender before getting the heloc. We had a HELOC and we had to provide info on income, assets, etc to get it.

Then I wonder if that lender could raise the question at a ch7 341 meeting which would prompt the trustee to investigate.

So I hope someone who knows will step in to this thread or the other and share their knowledge. I don't have any cash to hide, but I still wonder.

i really don't know about Arizona specially...actually many times each district can have their own methods...as well it can even be broken down into the counties of those districts. Additionally....OP is NOT from arizona...so that's not the question on this thread.

well actually i do know, because i did it. you may not appreciate the knowledge which i have shared about our experience. however, the bottom line, is it was successful.

those type of questions are usually NOT asked at a 341....when that complex, the situations usually resolved prior to...once again.. that comes from....... actual living the experience.

if you have personally done this as opposed to a quick look up or goggled bits and pieces of info here and there...it really is just not the same as one actually going through the same situation. i think it really confuses people, personally.

not that copying and pasting is not good...it's just for me, i'd rather have someone that actually has gone through the situation...but that's me.

and there were no tax implications....you just must to it correctly.

please.....when you use the word forgiven with respect to estate planning....one has noting to do with a discharge in a foreclosure and there are in fact legal federal limits annually.

also....debee...maybe you can explain just how one at 78 will do with a mortgage of well over 400k....and what that will do to his family?? i mean tax wise.....since it would leave the family in an absolute mess.

once again i stress to the OP...see an excellent ATTY...most importantly SEE an excellent accountant...they will assist you and guide you in the direction that will best help your parents reach their goals...which i'm certain were similar to ours.

[AbeVigoda]

Thanks very much for your thoughtful replies. I will continue to pick your experienced brains if you have no objection.

I will speak to an atty today I hope and at least begin to get the lay of the land on this. Your replies will help me ask
some of the questions I'll need to ask. Thanks again.

[AbeVigoda]

Now I'm going to try to consolidate some of the info in the thread a bit.

BTW debee, the HELOC was not used for the purchase, just living expenses.

So Tobee, you advocate a possible foreclosure followed by an eventual filing? Doesn't the foreclosure put their stock assets (125k) at risk for being swallowed up by the lender pretty much right away? Or are you suggesting they simply spend down what they have now (adjusting their spending to stretch it) and plan for a filing in say 2 years?

[debee]

tobee - The OP may not be in Arizona but his parents are & he is asking about them. Arizona statutes are going to apply - unless they haven't been there for the qualifying length of time.

You don't have to have filed bk to know something about it. It's not required in order to help someone.

His parents have a non-purchase money heloc on the property, it's already for sale and not moving so you know it's priced too high (aka: underwater) and if they walk away there are tax implications and the lender would have recourse.

As for what he should do & what his parents should do, in one of my earlier posts I recommended his parents talk to a lawyer and look into their options. That is still my position.

[AbeVigoda]

In the interest of wrapping my head around a potential course of action, can I burden either of you (or anyone else) to give me kind of a bullet-point outline of what
you might do if you were in charge of the situation? Of course my #1 step will be to speak with a BK lawyer and/or Acct. I'll reiterate the facts.

Ages: 78/72

Assets:
House in AZ (not selling at 525K) They would not like to keep it. They'd like to move closer to family out of state.
Cars - est. 23k
Stocks (non IRA)- 125k

Liabilities:
Mortgage 1 - 403 k
Mortgage 2- 69 k (non purchasing Home Equity Line)
CCs - 52 k

Monthly income - 4400.00 (dividends + ss)
Current Monthly exp. - 6400.00 (incl. Mortgage payments + min CC payments)

To alleviate this situation I would.....

1.

2.

3.

4.

(5., 6, etc.?)

Thanks very much if you can help me consolidate your already helpful info.

[tobee43]

tobee - The OP may not be in Arizona but his parents are & he is asking about them. Arizona statutes are going to apply - unless they haven't been there for the qualifying length of time.

You don't have to have filed bk to know something about it. It's not required in order to help someone.

His parents have a non-purchase money helot on the property, it's already for sale and not moving so you know it's priced too high (aka: underwater) and if they walk away there are tax implications and the lender would have recourse.

As for what he should do & what his parents should do, in one of my earlier posts I recommended his parents talk to a lawyer and look into their options. That is still my position.

each situation is so different.....and if it's 4 years in az...even the OP's listing below is not something that should be considered ....i would actually, say and believe an accountant would be most helpful ...in respect to the tax ramifications etc. not an atty...LOL!!! i have worked for some of the best and they can't even balance a check book...LOL!!! so they are not always the best unless they are in fact a "TAX" atty...they don't need one of those expenses....

we actually went to our accountant first....when outlining our "plan" we had no tax problems per sa...and our state one you filed and maybe i'm not clear on why you think there is a tax issue unless it is cashing in investments....(actually most are down so much it's usually a loss at this point).

also...if you put enough distance in the time...there simply is no tax issues..you claim that year any gain...or carry over the losses for most likely EVER in this economic climate.

i still stand firm...accountant first....atty...and a darn good one second.

good input deb.

[tobee43]

In the interest of wrapping my head around a potential course of action, can I burden either of you (or anyone else) to give me kind of a bullet-point outline of what
you might do if you were in charge of the situation? Of course my #1 step will be to speak with a BK lawyer and/or Acct. I'll reiterate the facts.

Ages: 78/72

Assets:
House in AZ (not selling at 525K) They would not like to keep it. They'd like to move closer to family out of state.
Cars - est. 23k
Stocks (non IRA)- 125k

Liabilities:
Mortgage 1 - 403 k
Mortgage 2- 69 k (non purchasing Home Equity Line)
CCs - 52 k

Monthly income - 4400.00 (dividends + ss)
Current Monthly exp. - 6400.00 (incl. Mortgage payments + min CC payments)

To alleviate this situation I would.....

1.

2.

3.

4.

(5., 6, etc.?)

Thanks very much if you can help me consolidate your already helpful info.

abe...once again...really i would not give any legal advise as to how you should proceed. i can only tell you what i would do...amd what i did do.

[tobee43]

You don't have to have filed bk to know something about it. It's not required in order to help someone.

oh, no, of course not...however, it is helpful when one has been through a similar scenario. which our situation was extemely close...with even higher numbers.

it's advise via experience...which as we all know may work in one state and not another...for that matter ...maybe not even the same in a district or county.

[AbeVigoda]

oh, no, of course not...however, it is helpful when one has been through a similar scenario. which our situation was extemely close...with even higher numbers.

it's advise via experience...which as we all know may work in one state and not another...for that matter ...maybe not even the same in a district or county.

Thanks. Sorry, I should say that I'm not looking for specific legal advice. Just trying to get a handle on the options, as it is all so new to me.
I got a bit confused as to what you actually did in your case, tobee. Would you mind kind of outlining that? You went through foreclosure, but bought a new house first?
I'm a bit slow on the uptake.

[debee]

I don't know the situation with loan forgiveness tax implications for this year. In the past it was possible to get forgiveness without having to pay federal tax on it. I don't know about state tax. I have heard it's possible to get "forgiveness" as part of a short sale if the lender agrees. If their 1st & heloc are the same lender, that might be worth investigating. If they could go that route, it would leave only the cc debt. It might be possible for them to pay that down without filing bk.

I have also heard of a situation where the heloc lender in the act of foreclosure loses their right to recourse. Again, whether that applies in AZ or how to go about encouraging it to happen or what the risks are would be something a lawyer would know.

I have no idea how your parents can protect all of their assets. It may be possible, but I don't know how. I would suggest talking to an attorney about how to proceed. During a bankruptcy proceeding the creditor(s) will have an opportunity to raise objections, ask questions. If the creditors are aware of the existence of the money, they can bring it to the attention of the trustee. Then the trustee can look into that. They will have to disclose what they did with the money. That could end in a discharge being denied or worse - I'm not sure what. Losing the money? I don't know. It would be unwise to advise them to do something with their money that will come back to bite them later.

Another factor you might want to consider is the time frame & how much time you think your parents have left and how much stress all of this might cause them and how much delay and what price you would put on that.

[Cristo]

I would be very careful about putting the stock money into "equity" in the house. Getting to exempt $150,000 in equity only works if there is $150,000 in equity left in the house After The Sale. If the house were sold in an auction setting it could sell for what is owed or less, leaving your parents with no equity to exempt, thereby loosing everything. Please consider carefully before doing anything. It will be hard to find one "expert" to advise you on this as most are not cross-trained.

This calls for some out of the box thinking. Could your parents live on just the social security if they were debt free? If they are selling stock assets every month, it's only a matter of time before the dividends are not enough to live on anyway. I think this is the mindset that they need to get into. SS income is exempt in a BK situation, I believe. They may not need to file, but if they do.....
I would think that there is a way to protect the money.....Pay cash for a $100,000 condo where they want to live? Stop paying the mortgage on the AZ property and save the money to move and settle with the credit cards ( you should be able to settle for 30% or so yourself, no need to a "debt relief" person). Ride out the forclosure for as long as possible living rent-free, then use the money to settle the credit cards, buy the condo and walk. IF they get sued for a deficiency on the mortgage then they might need to file for Bk, but maybe not. The lender might not sue if the deficiency is not large, the lender may not bother. Since the only income they would have would be the SS payments, they can not be garnished. There is the potential for a lien on the property, but then you could file the BK. I believe that even if they are living in a different state the AZ exemptions would apply if they have been there less than 2 years, so the equity in the condo would be exempt. Just some food for thought.....where there is a will there is a legal way, it just takes a lot of thinking and planning.

[JSchrader]

This issue has already been quite thoroughly hashed out, but be very careful before transferring money from a non-exempt asset to an exempt asset. You really need to consult an attorney if you are contemplating this.