Can we take the time to acquire exempt assets?

[StrawberrySu]

We can't file until fall, and if we pass the sniff test for a Non-consumer BK7, can we (should we) postpone filing for a few years so we can buy a house with the money coming in from our rentals and the money we aren't paying on our mortgage and credit cards (all together about $4000/mo)... we are only looking to buy for around 30k, or maybe do land contract.

If we move to North Carolina now, buy a cheap house and wait to file in two years, we get a $35k per person exemption for household, so that's $70k. Since we KNOW we are in financial trouble now, will the court hold it against us for doing this?

I know the rental property income could go at any time, depends on when the foreclosures happen. We would just take it for as long as we can and when it's done, it;s done.

[frogger]

If time is not a problem, planning is always an option.

[StrawberrySu]

Well there is planning and then there is abuse ... just want to make sure I don't cross the line, stand on the line, stick a hand over the line and draw it back, etc., lol.

[frogger]

There is a difference and no one here but you can make that distinction for your situation. Read, study, and follow the law.

[tcreegan]

Hi StrawberrySu!

When walking the line in the pre-planning stage...really nice to be hanging onto the hand of a good BK attorney.

The more I read about the non-consumer BK, the better it sounds. Whatever you do hang on to the non-consumer status!

My worry would be letting the rental properties go into foreclosure, sued for deficiency, is the deficiency judgement still non-consumer debt?

Tom in Colo

[tcreegan]

...@%$)@#* computer decides to post before I am done typing

Some mortgage contracts have a clause that assigns rents to the mortgage holder if you stop making payments/default. Check your contract. This might give the lender an avenue to sue for the rents collected after you stop paying the mortgage.

Some states have laws that you can't collect rent off a property in default. Check OH laws. Again, worry is giving the lender an avenue to sue for the rents collected.

And heading into BK, the worry is not as much getting sued since judgments can be discharged in a BK, but does it give the mortgage holder a valid reason to object to the discharge of their debt? (and worry about losing the non-consumer status of the debt)

Once you file BK, the rents belong to the BK estate, you know the trustee is going to want the $$!

Oh well, just spouting some thoughts running through my head, kinda playing devils advocate...

Tom in Colo

[StrawberrySu]

...@%$)@#* computer decides to post before I am done typing

Some mortgage contracts have a clause that assigns rents to the mortgage holder if you stop making payments/default. Check your contract. This might give the lender an avenue to sue for the rents collected after you stop paying the mortgage.

Some states have laws that you can't collect rent off a property in default. Check OH laws. Again, worry is giving the lender an avenue to sue for the rents collected.

And heading into BK, the worry is not as much getting sued since judgments can be discharged in a BK, but does it give the mortgage holder a valid reason to object to the discharge of their debt? (and worry about losing the non-consumer status of the debt)

Once you file BK, the rents belong to the BK estate, you know the trustee is going to want the $$!

Oh well, just spouting some thoughts running through my head, kinda playing devils advocate...

Tom in Colo

Tom, before I listed my two rental properties I had a phone conversation with a real estate attorney (he was related to the realty company I was going to list with so he gave me free advice). I asked specifically if I could keep the rent money and not pay the mortgages, and he said yes. I have seen found out that one of them, the one specifically purchased as an investment, has an "assignment of rents" clause, but not the other. So until the AOR clause is enforced I am thinking, based on the atty, that I can keep the rents.

As to the Non-Consumer VS Consumer ... here are my calculations for the means test, with different scenarios, since I didn't initially realize I included the rental mortgages on it: (oh, and since there is not any space for more than one mortgage, I put the total of all three on the line for your mortgage, hopefully that isn't skewing the numbers)
job + retirement + rental income = -744 DMI
unemployment + retirement + rental income = -1844 DMI
retirement + rental income = -3644 DMI
retirement + unemployment = -3344 DMI

So with all this negative DMI does it matter which way I go? Should I keep looking for avenues to go Non-Con if I am going to be so negative in any case?

so worst case scenario is my husband gets a new job that pays what his current job does (unlikely), and we are able to keep the rents (I do realize the BK court will take them, just hope it doesn't hold up our discharge as happened to another poster here) - - we still come out -744 DMI.
if i can keep the rents now, and get them back after discharge, I would love to do that. If not, okay.

My current problem is talking to a lawyer. Called several in NC, asked to do a phone consult ..they all said wait till I move then come in. I feel it is a waste of my time to speak with an OH atty when I plan on filing in NC, because a lot of my important questions are going to hinge on what that court does. So how can I plan when I can't get legal advice? I am stumped!

And thanks for being a devil's advocate, that's what I need. I cannot begin to tell you how much your input and others on this board have helped! I wish this forum could have a special section for Non-Consumer Chapter 7! That would be so helpful.

[daylate]

When the weather breaks, NC is only a 6-8 hour drive. Why not drive down for a few free consults? Don't have to tell them you aren't there yet.

Other thing to check out is if there is a time requirement for using the homestead exemption-I seem to remember seeing someplace that you had to be a resident for 40 months-don't know if that was a fed thing or a state thing but thought I'd mention it.

Good luck.

[keepmine]

When the weather breaks, NC is only a 6-8 hour drive. Why not drive down for a few free consults? Don't have to tell them you aren't there yet.

Other thing to check out is if there is a time requirement for using the homestead exemption-I seem to remember seeing someplace that you had to be a resident for 40 months-don't know if that was a fed thing or a state thing but thought I'd mention it.

Good luck.

Won't be an issue.
The section of the code you're thinging about says your homestead exemption is capped at $137K if you've owned the home less than 1415 days. This was to prevent people from moving to places like Fl. or Tx. with an unlimited homestead exemption and immediately filing bk.The late Bowie Kuhn {former commissioner of MLB} did just that in the 90's. Liquidated everything thing he had in New York and moved to Fl. and bought a mansion and then filed bk.

[StrawberrySu]

When the weather breaks, NC is only a 6-8 hour drive. Why not drive down for a few free consults? Don't have to tell them you aren't there yet.

Other thing to check out is if there is a time requirement for using the homestead exemption-I seem to remember seeing someplace that you had to be a resident for 40 months-don't know if that was a fed thing or a state thing but thought I'd mention it.

Good luck.

Thanks, daylate! (Are you related to dollershort? Bet that's the first time you heard that, lol)

Yes a trip down there would be a good idea, and hubby has weeks of vaca saved up, we could take a few days.

My understanding of the homestead exemption is if I file anytime in the next two years after I move, I use OH exemptions, but OH doesn't allow me to use their exemps once I am no longer domiciled here, so I go with federal. Which works out best, since home here has no equity to protect, can't buy a home there with money I am not paying on bills here (fraudulent conveyance), so homestead exemption, which is really your greatest protection in BK, is unavailable to me no matter what I do. EXCEPT by using federal, I can take this cash I am not paying on mortgages and exempt 20,250k, for my husband and myself. So the ability to file federal exemptions is the only life saver I have.

I keep thinking, with soooo many people underwater across US, what good do these exemptions do? How many people have equity to exempt? For so many of us, it seems like the greatest protection we are afforded in BK is worthless. Okay, enough ranting .... I am sure many folks can use the exempts, it just seems in this economy they are few and far between.

Oh, and if I sound like I know what I am talking about, maybe even a little BK savvy ... uh, that's not me, thats the education I have got here on BK Forum in like a week!

[keepsmiling]

Those of us who bought homes before the "bubble" still have some equity. Still it pisses me off that in other states I wouldn't have to worry about that. It's not like I can eat it and I can no longer even borrow against it. This is one reason I haven't filed yet- I REALLY don't want to lose my house due to debatable equity. I can see that being a major headache in our case as zillow rates our house way over what it's really worth. My dh wants to patch the roof and I said no, we are leaving it in as bad shape as possible til this is over to keep the equity down! So we may be living with buckets around when the snow finally melts
Actually I think you get a little more in your exemption- 21, 625 each if I am correct. So you just made enough for a payment to the lawyer.

[StrawberrySu]

Those of us who bought homes before the "bubble" still have some equity. Still it pisses me off that in other states I wouldn't have to worry about that. It's not like I can eat it and I can no longer even borrow against it. This is one reason I haven't filed yet- I REALLY don't want to lose my house due to debatable equity. I can see that being a major headache in our case as zillow rates our house way over what it's really worth. My dh wants to patch the roof and I said no, we are leaving it in as bad shape as possible til this is over to keep the equity down! So we may be living with buckets around when the snow finally melts
Actually I think you get a little more in your exemption- 21, 625 each if I am correct. So you just made enough for a payment to the lawyer.

I am calculating the "any property: up to $10,125 of the unused homestead exemption" and I guess I can use the wild card too, 1075, for a double total of $22,400. Even though it is an exemption, I still worry the trustee will look askance at it, lol.
Both my renters are apprised of the situation and are happy to stay now that their rent is reduced I informed them we wouldn't be able to make major repairs, so if the furnace breaks it's over. They have agreed to do little repairs in exchange for their reduced rents. I read somewhere (maybe here) that the trustee would not approve if we didn't collect rents, even tho we aren't paying the mortgages. So mortgage company reuires me to stop making payments, trustee requires me to collect rents ... I guess I collect rents.

I sympathise with your situation, hopefully we won't need to use any buckets. Our home is in good repair, and the sting of losing it is lessened a bit for my husband because he is getting out of all the improvements we had planned to do this summer: rebuilding and old deck and roof, landscape and concrete work, etc.
Oh, by the way ... keep smiling!

[daylate]

StrawberrySu-You just caught my attention big time-you said "My understanding of the homestead exemption is if I file anytime in the next two years after I move, I use OH exemptions, but OH doesn't allow me to use their exemps once I am no longer domiciled here, so I go with federal."=where did you read this? did an attorney tell you this? could be very germane to me. If you live out of state but still have a house awaiting foreclosure where are you domiciled? Do you know? Would love to hear/read more about this. And dollarshort is my alter ego...LOL

[StrawberrySu]

StrawberrySu-You just caught my attention big time-you said "My understanding of the homestead exemption is if I file anytime in the next two years after I move, I use OH exemptions, but OH doesn't allow me to use their exemps once I am no longer domiciled here, so I go with federal."=where did you read this? did an attorney tell you this? could be very germane to me. If you live out of state but still have a house awaiting foreclosure where are you domiciled? Do you know? Would love to hear/read more about this. And dollarshort is my alter ego...LOL

hey there fellow buckeye! You can find this info many places, I am copying from the NC means test:
"Prior to the new bankruptcy law, filers used the exemptions of the state where they lived when they filed for bankruptcy. Under the new rules, however, some filers will have to use the exemptions of the state where they used to live. Congress was concerned about people gaming the system by moving to states with liberal exemptions just to file for bankruptcy. As a result, it passed residency requirements filers have to meet before they can use a state’s exemption system.
Here are the new rules that apply to exemptions for everything but a home:
If you have lived or made your residence in your current state for at least two years, you can use that state’s exemptions.
If you have lived or made your residence in your current state for more than 91 days but less than two years, you must use the exemptions of the state where you lived for the better part of the 180-day period immediately prior to the two-year period preceding your filing.
If you have lived or made your residence in your current state for fewer than 91 days, you’ll need to wait until you have lived there for at least 91 days before you can file (and then use whatever exemptions are available to you according to the rules set out above).
If the state you are filing in offers a choice between the state and federal bankruptcy exemptions, you can use the federal exemption list regardless of how long you’ve been living in the state.
If these rules deprive you of the right to use any state’s exemptions, you can use the federal exemption list. For example, some states allow their exemptions to be used only by current state residents, which might leave former residents who haven’t lived in their new home state for at least two years without any available state exemptions.
A longer residency requirement applies to homestead exemptions: If you acquired a home in your current state within the 40 months before you file for bankruptcy (and you didn’t purchase it with the proceeds from selling another home in that state), your homestead exemption will be subject to a cap of $125,000, even if the state homestead exemption available to you is larger. For detailed information on homestead exemptions, see Ch. 4.
NOTE - a potential 'Catch 22': In some states, exemption rules can only be used by a resident, or if you have your "domicile" there. But the federal rule says you must use the state you moved away from. So.... IF your former state's exemption laws, for which you may "qualify" under the federal formula, do not apply to non-residents -- then your your answer gets more complicated."

See? Isn't that easy to understand? A child could figure it out, lol. I get so confused, with the 91 days and the 180 days and the two years ... it goes round and round in my head! Several posters on here have addressed this for me as well. And I think domiciled means where you physically reside. In my supposed atty consult yesterday I was told the moment I moved out of OH II could not use OH exemptions.

[daylate]

OH...IO....yeah this stuff is clear as mud...written by attorneys to keep attorneys gainfully employed...LOL...(with no disrespect to des and the other attorneys who help us out here-just a bit of gallows humor)The attorney who told you about the minute you moved-he(or she) in Ohio or NC?...trying to do this in a different state is confusing because you wind up using an attorney who isn't familiar with your old state rules...I was trying to find in the Ohio Code where it limits use of its exemptions to its residents..so far no luck...Bueller? Anyone?