Consumer mortgage debt on rental properties

[HighUnder]

Hello all,
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I am considering filing bankruptcy and am currently researching which chapter will be best for me (if any).
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I own several properties, all of which are underwater with the exception of my primary residence (about $15k in equity), which I intend on keeping. *Most of the properties also have HELOCs on them, all of which are unsecured because the values of the properties are lower than the balances of the first mortgages. *I have finally gotten to the point where I feel that I need to cut my losses and get out of the hole I have dug for myself by trying to hold on to these properties, none of which has positive cash flow.
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Most of my debt consists of these mortgages ($2 million in 1st mortgages, another $400k in helocs for the rentals, plus a $300k 1st mortgage for my primary residence), and another $18k in credit card debt.
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After doing some research on this board, I started to get excited at the prospect of filing a non-consumer Chapter 7…until I read that the rental properties would have to have been purchased as investments (non owner-occupied) in order for those mortgages to be classified as non-consumer debt. *Alas, most of them were not, which would preclude me from filing a non-consumer Chapter 7…
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My salary is over my state’s median income by a few thousand dollars per month, and my debt limits currently exceed the Chapter 13 requirements. *Would I be able to include the expenses of one or two of the rentals in the means test, if it would allow me to pass?
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Thanks for any and all advice or suggestions! *If anyone from California has been in this situation and can share their experiences, please do

[cofer22]

I'm in the same boat up here in Idaho. 2 properties way under in Colorado. Both currently rented. One used to be my main residence. Somebody recommended talking to a number of attorneys to see if they'd be willing to take it on as a Non-Consumer case. That's what I'm going to do. Luckily, my wife and I meet the means test up here, so if we can't go the non-consumer, we'll go consumer. Not sure any of this helps, but you should talk to a few attny's to see if one could help you out..

[despritfreya]

You have nothing to lose by trying your case as a "non consumer" case (and everything to gain if successful). The worst thing that can happen is that the case gets dismissed or you elect to convert to an 11. And, while I have not done the research so I could be wrong, I do not think there is any binding 9th Cir. authority that stands for the proposition that you must look at the original intent of the debtor as it relates to use of the property. Mark the properties as "rentals" (rental 1, rental 2 etc) which is a correct statement and see what happens.

Des.

[HighUnder]

I'm in the same boat up here in Idaho. 2 properties way under in Colorado. Both currently rented. One used to be my main residence. Somebody recommended talking to a number of attorneys to see if they'd be willing to take it on as a Non-Consumer case. That's what I'm going to do. Luckily, my wife and I meet the means test up here, so if we can't go the non-consumer, we'll go consumer. Not sure any of this helps, but you should talk to a few attny's to see if one could help you out..

Thanks. I have consulted with three different attorneys, and unfortunately I didn't know enough to ask the proper questions when I met with the first two. The third seems to think a chapter 7 will work for me, but again, it wasn't until after I met with him that I realized a non-consumer case could be my best friend...I will be chatting with him later this week to discuss which route I should take.

[HighUnder]

You have nothing to lose by trying your case as a "non consumer" case (and everything to gain if successful). The worst thing that can happen is that the case gets dismissed or you elect to convert to an 11. And, while I have not done the research so I could be wrong, I do not think there is any binding 9th Cir. authority that stands for the proposition that you must look at the original intent of the debtor as it relates to use of the property. Mark the properties as "rentals" (rental 1, rental 2 etc) which is a correct statement and see what happens.

Des.

I think I will do just as you suggest. I certainly hope your thoughts are correct, and when I discuss this with the attorney later this week, I'll ask more detailed questions. He said he would call one of the trustees and give him/her the "what if" scenario and see what he/she says. My fingers are definitely crossed! Thanks!

[despritfreya]

He said he would call one of the trustees and give him/her the "what if" scenario and see what he/she says

Please remember, it is not the interim trustee who is going to raise the issue "business/consumer", it is the UST (the interim trustee's boss). While it's ok to bounce the idea off him/her, the better approach, IMHO, is to find attorneys who have taken this tactic in your district. Personally, I have filed at least 3 cases in the last year with similar facts. So far, so good, but I am not in California.

Des.

[HighUnder]

Please remember, it is not the interim trustee who is going to raise the issue "business/consumer", it is the UST (the interim trustee's boss). While it's ok to bounce the idea off him/her, the better approach, IMHO, is to find attorneys who have taken this tactic in your district. Personally, I have filed at least 3 cases in the last year with similar facts. So far, so good, but I am not in California.

Des.

Great point. I'm glad I have time to still shop around and find an attorney who has dealt with this situation before. At least now I know (better) what questions to ask. Thanks again...