Trying to help my parents - Multiple questions.

[Dee]

First, I want to say a big THANK YOU to everyone on this forum for the help you gave me last year when my husband and I filed BK. Since then, we have both found new jobs. Between the jobs and the discharge, our financial situation has taken a complete 180.

Now for the current problem. My dad is retired and receives about $80k/yr from his retirement fund. My mom doesn't have a retirement fund, but between SSI and a mineral royalty she receives about $20k/yr (most is SSI). They sold their home in Texas and moved to Florida in 2009. They purchased a new home in March this year on a VA loan (no 2nd) and put almost all of their savings into it. They have about $50k+ on CC's, which they planned to pay off within the next 24 months, and could easily have done that, except...well, we all know what they say about "the best laid plans"...

My dad has now been diagnosed with cancer. To add insult to injury, the company he retired from just sent out a letter saying ALL retirees and spouses will be dropped from the group health insurance (which the company paid for as part of his retirement benefits). So they will have to buy medicare, which will not cover all of my dad's expenses, plus they will be stuck in the "donut" on their prescriptions, which are HUGE, since my mom also has multiple health problems.

And if that wasn't bad enough, they just got a letter from their mortgage company informing them that their mortgage payment will be going up $600/mo on January 1 due to a miscalculation on their escrow by the title company.

They could still make the higher mortgage and CC payments IF there wasn't the health insurance issues. I decided to look into the possibility of a Ch 7 for them to discharge to CC's, but even though I've been through this myself, I've got some questions and would really appreciate some advice.

1. They sold their house in TX in July 2009 and stayed in a hotel in FL for a while before finding a place to rent. They changed their driver's licenses in November 2009. Would residency start in July or in November?

2. Assuming the residency would start when they changed their DL's and they would be using TX exemptions, what would they do about their house? TX only allows the homestead exemption for property in TX. Or is it even an issue since there is only about $5k in equity? They absolutely want to keep the house.

3. They only have one car, which is 7 years old and paid for. They also have $10k left in savings. Should they use that money towards the purchase of a new car that would be reaffirmed? If not, what should they do with this money?

4. Will the fact that they bought a new house and furniture this year raise giant red flags?

I know I'll have more questions, but any advice you could give me would be appreciated!

[ValleYum]

Hi!

(1) Not sure - and will defer to someone who knows more than me on this topic but it may be worth it if residency starts in November (see below for why).

(2) and (3) Texas allows you to choose either the Texas exemption set -or- the Federal exemption set. When folks are in a residency 'limbo' due to the 2 year rule they sometimes end up using the Federal exemptions anyway. In your parent's case, the Federal exemption set looks like it will help them more.

They can exempt up to $21,625 in equity in a homestead (doubled if they are married and both file) so that should easily cover their $5,000 in home equity. They will have a good bit of unused homestead exemption left over.

Then you take the UNUSED portion of the homestead exemption up to $10,825 (doubled if they are married and both file) and this can be used to cover their cash and any part of the car that exceeds the federal vehicle exemption of $3,450 (they can't double this unless they each own a car) and any other items they may need to exempt.

Remember that they can use this wildcard exemption since they won't claim the full Federal homestead exemption as well as the general Federal wildcard exemption of $1,150 (doubled if they are married and both file).

(4) I think the cancer diagnosis coupled with the health insurance news and escrow shortage that came AFTER they bought the house and furniture should be understood by anyone - even a Trustee. Oh! Furniture exemptions - the Federal exemption set would help them MUCH more than Florida's since you can deduct household goods, furnishings & appliances up to a total of $11,525 (doubled if they are married and both file) with the caveat that no single item may be valued at over $550. Florida's personal property is $1,000 TOTAL.

More info on Federal exemptions can be found here: http://www.bkforum.com/wiki/Federal_Exemptions

As always, getting your folks to a few consults with experienced BK attorneys ASAP would be a good idea especially if they can benefit by using the Federal exemptions!! I am sure FL attorneys are very used to dealing with recent transplants to the state.

I wish you and your parents the very best!

[daylate]

I would think their residency would change when they rented an apartment. Again not sure just trying to logic it out.

[despritfreya]

I cannot speak towards the application of Florida exemptions but their residency in Florida began in July, 2009 when they move to the state permanently. It goes by intent not by when they change the driver's license or found a place to rent. Living in a hotel with the intent to remain in the state is enough.

The bigger problem is whether or not they will qualify for the 7 without proving "special circumstances". Your dad's retirement ($80K) alone and then adding the royalties, puts them above median income which, I believe is around $50K for a family of 2 (someone will correct me if I am wrong). They really need to meet with a qualified attorney to discuss this.

Des.

[tobee43]

des has excellent advise, (as usual ). i want to mention this. in florida, the median income changes from county to county. our county for a family of two was 58k. (we thought rather high, but that was the median income allowed). also, as des mentioned, there would be no question as to their florida residency status, although, i didn't think that was one of your main concerns.

here's my view, it really doesn't matter that much as to the actual income one brings in, rather, what matters is the net after expenses. with the increase of the mortgage payment and the medical expenses, provided they are be proven, they may surprisingly fall within that median income level of their county.

so first, i would really take a close look at their expenses, including those increases you mentioned. (increased housing mortgage payments and medical costs). come up with at least an approx. net income. even the pharmacy can provide an estimate of the yearly costs if you needed, one would think. secondly, as des points out, speak to an atty and find out what and where they stand presently in the county they are residing in.

[momofthree]

They may also want to consider waiting to file until after all of his cancer treatments, so that medical bills can be included in the BK filing....

[tobee43]

They may also want to consider waiting to file until after all of his cancer treatments, so that medical bills can be included in the BK filing....

great point! i know we included over 200k worth or medical expenses in our bk.

[Dee]

Thanks for all of the advice! I've got them compiling numbers so I can run the means test for them, then we'll go from there.

[tobee43]

Thanks for all of the advice! I've got them compiling numbers so I can run the means test for them, then we'll go from there.

best of luck with it dee and my prayers are with you and your family!