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

[tobee43]

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.

well abe...actually i cannot get specific on the board...however, i will be as general as possible with respect to your situation.
also pick as many brains as you can to gather and collect as many ideas as possible.

each situation is different, most in different states where different laws apply....we were not quite the age of your parents, but closely and rapidly reaching what we thought were going to be our "golden" years....when all this economic crisis hit us right over the head. i doubt, as with us, that your parents situation has to do with poor money managment skills...we always lived within our means etc.

i hate to give you a blow by blow...but this is what we did.

so...basically we had a mortgage more than what your parents had
illness hit us so one of our high salaries was gone
time passes
slowly but surely the medical cost began to build since we reached ins. co. max.
we had investments...cashed them in.....ALL......401's, stocks, bonds, name it we cashed it.......
used money to live
time passes
the other one lost their job
tried to work with the mortgage company on a loan mod....according to them we still made too much
while working on the loan mod...actually we were always on time with our bills but were told by the bank we MUST be 3 months behind the mortgage to apply for loan mod
time passes...into over 1 year and 1/2
waited months and heard nothing.
called to undate with the bank and they said it should be soon now....it was we were served with a summons of foreclosure.
now...we had already decided after months of waiting on the bank that even if they did in fact give us a loan mod we could and would never pay off this house and it was killing us. so after tears and fears we made the sound business decision to let it go.
we contacted an atty...he said we could stay there as long as we want up until the shreiff's sale...but we couldn't because the cost alone...and we had all but 3 rooms shut off...was over 1200.00 month for utilities.
more time passes....monies cash in at this point are no where to be found......we needed to live after all.
so we were advised by the atty to lock it and leave it
surrendered one car
no foreclosure date set
we didn't...i called the bank mod officer and told him
we left...we are staying at a relatives home that is empty and paying all the expenses. they told us we may be able to purchase it from them in the future.
we left no forwarding address or phone numbers
time passes
no foreclosure date set
we wait until we can file in the new state....
we file
any questions all time tables questionable can truthfully be answered "no".


it's now going on 3 years...we have and listed a docket number on the petition for the forclosure and surrendered the property...but they still have not foreclosed. the bk was discharged so although our names are still on the deed until the foreclosure sale takes place or the bank agrees to sign a warranty deed and general release they don't have clear title, but we have no further financial obligation....unless there were hoa due...which in our class there were not.

once we get our credit built back up to get a mortgage we will buy this house. but not until then. so NO we did NOT buy anything...we went to court with the shirts on our back...(actually i had a dress on).

get as much info as possible...once again...every single situation is different. we spent our monies living..we had nothing to hide...there was nothing left at that point.

hope that helps

[tobee43]

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 for closure 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.

this is a perfect senerio...once again...one how to do it legally and carefully....

[tobee43]

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.

absolutely and completely agree....this is really very good advise...i think.

[Pandora]

Hello,

I would thank any in advance for advice on this. I've recently become aware of my parents' difficult financial situation. They can't grasp that BK may be a reasonable option for them. Can someone give me an educated opinion(s) on this?
This is AZ I'm talking about. Here's the deal in a nutshell:

Dad 78 yo/Mom 72 yo

House on mkt. for 525k (owe 473K orig. and second mortgage)
Mortgage pymts combined (3100.00/mo)


CC debt of 52 k (1600.00/mo payments)

current income (dividends + SS)- 4350.00/mo
Projected Budgeted expenses - 4500./mo after paying off CC debt.
Though currently they spend about 6300/mo.

Big thing is protecting approx. 125k in securities from which they make
dividends (and he doesn't want to lose that obviously). That's all he's
got and he sells some each month.

I'm very interested in Ch. 7 for them and in particular the AZ 150k homestead exemption as a way to hang on to what they have left. I think any other conveyance
of what they have wouldn't work at this point, right?

Question 1: Based on this snapshot, do they look like they should strongly consider ch. 7BK?
Question 2: How would it work to convert their 125k in securities into equity in their
House. (It's been on the mkt. and they will not try to keep it).

Thanks very much for any advice concerning this matter.

AV

Income of $4350 a month - do they pay taxes on this monthly, at the end of the year, or is it exempt?

mortgage payment of $3100 - takes up approximately 72% of their income.

Credit card payments of $1600 a month - they're already -$350 at this point.

No utilities, health care expenses, gas, car, insurance (if applicable) or any other living expenses accounted for at this point.


Bankruptcy is the answer. Let the house go, its sinking them. Even if CC's were gone, the house still takes up 72% of their income. No brainer...

Consult with a reputable and knowledgeable attorney who specializes in BK but who may also have in their practice someone who specializes in accounting and such. Our attorney's firm specializes in 4 areas - 6 attorneys, each devoted to different areas. Seek at least 3 consults before deciding on which is the best way to go.

[tobee43]

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?

sorry...this answer is "backwards"....yes, that is basically saying what i'm saying...

also..each child your parent has, including but not limited to your spouse and grand children are allowed to have 10k given or gifted each year...that could include your spouse....so if you have a few brothers and sisters....the 125 can be easily removed...then wait out the time period.

now...i'm NOT saying to cheat anyone.......please do not misunderstand. we personally needed our monies for our 1700 mile relocation and set up...and basic living expenses, etc.

we now...live well on a pension and ss....it worked well for us...once again...careful, thoughtful, mindful planning which BEST suits the needs of your situation.

i understand the age if your parents....shoot mine are in their 90's and play golf everyday, they really put me to shame....so it's not like this is the end of the line...this is time for them to relax...and stop worrying.

i know the mortgage amount was killing us slowly everyday. so what choice...stay there and have all of our life savings be eaten up by the house that needed well over 100k of repairs anyway...or let it go, take what we had left and start new...wait the time...time is free....what the mortgage company is going to call?

put them in a rented condo...they need not buy now, and i would not do it...well, actually we couldn't.

[tobee43]

Income of $4350 a month - do they pay taxes on this monthly, at the end of the year, or is it exempt?

mortgage payment of $3100 - takes up approximately 72% of their income.

Credit card payments of $1600 a month - they're already -$350 at this point.

No utilities, health care expenses, gas, car, insurance (if applicable) or any other living expenses accounted for at this point.


Bankruptcy is the answer. Let the house go, its sinking them. Even if CC's were gone, the house still takes up 72% of their income. No brainer...

Consult with a reputable and knowledgeable attorney who specializes in BK but who may also have in their practice someone who specializes in accounting and such. Our attorney's firm specializes in 4 areas - 6 attorneys, each devoted to different areas. Seek at least 3 consults before deciding on which is the best way to go.

sooooooo agree!!

[momofthree]

They are going to have a very hard time exempting $125k in stocks and $23k in vehicles.

I think a pp hit the nail on the head. Stop paying the mortgage and live there rent-free as long as possible (can take as long as 2 years for foreclosure to occur). Use that money to settle with the credit cards. Once your parents are a few months behind, the settlement offers will start flowing in. The day before we filed (about 6-8 months past due) we got a settlement offer on our largest credit card for less than 25%. They wanted $2450 to settle a credit card with a balance over $10k!

If you really want them to file bk, and aren't interested in settling or other options, then consult with an asset protection attorney. They are going to have to plan VERY carefully if they want to keep those stocks.

[Pandora]

They are going to have a very hard time exempting $125k in stocks and $23k in vehicles.

I think a pp hit the nail on the head. Stop paying the mortgage and live there rent-free as long as possible (can take as long as 2 years for foreclosure to occur). Use that money to settle with the credit cards. Once your parents are a few months behind, the settlement offers will start flowing in. The day before we filed (about 6-8 months past due) we got a settlement offer on our largest credit card for less than 25%. They wanted $2450 to settle a credit card with a balance over $10k!

If you really want them to file bk, and aren't interested in settling or other options, then consult with an asset protection attorney. They are going to have to plan VERY carefully if they want to keep those stocks.

I agree with the 125K and 23K - however the thing that they need to look at if deciding to settle and then walk on the house is if the state is recourse or non-recourse. Without filing BK, they could be 1099'd for the difference or sued. Either way they'll have a hard time with that much $ in assets, either through BK or just walking / settling.

Yep - agree with Momofthree - asset protection attorney is high on the list to see what could/would happen in either scenario. Would hate to have assets frozen...

[brokejoker]

They are going to have a very hard time exempting $125k in stocks and $23k in vehicles.

I think a pp hit the nail on the head. Stop paying the mortgage and live there rent-free as long as possible (can take as long as 2 years for foreclosure to occur). Use that money to settle with the credit cards. Once your parents are a few months behind, the settlement offers will start flowing in. The day before we filed (about 6-8 months past due) we got a settlement offer on our largest credit card for less than 25%. They wanted $2450 to settle a credit card with a balance over $10k!

If you really want them to file bk, and aren't interested in settling or other options, then consult with an asset protection attorney. They are going to have to plan VERY carefully if they want to keep those stocks.

I would seriously think about doing this! Are they staying in Arizona? There is a $150,000 homestead expemtion according to the exemption list at the top there. I would keep my stocks for now and stop paying the credit cards and house payments. I would wait three months and then start negotiations with the credit cards companies. I would settle those for cash payments (I wouldn't go more than 40-50% on the balances). So settling CCs for around $30-35,000 with the cash taken from money socked away from not paying CCs or house for the 3-6 months and with stocks cashed out. Then I would wait until they started foreclosure proceedings and in the meantime scour the landscape for the perfect condo that's on short sale or a sheriff's sale and pay cash for that.

Then they would have no debt, a condo that's paid for, and SS that would cover their expenses. Hopefully they would still have around $50,000 in stocks too after the settlements and finding a good deal on a condo. When their current home goes to auction, if there is a deficiency then they could file BK and get rid of that, right? Then they would have a $150,000 homestead to cover their new house and in the meantime they could be moving allowed amounts from stocks into protected assets like an IRA.

Completely what I would do, not legal advice. <- feel I have to write that since everyone else does. LOL