Chapter 7 and Two Family House?

[moe]

Now that I am looking at things more carefully I am wondering if we do qualify for a Chapter 7 Bankruptcy.

We have a two family house though. We were under water with an adjustable mortgage and we got a readjustment to our mortgage that put us exactly at market value with a normal 30 year mortgage. That was lucky.

I don't think we have many assets. Our cars are really old. I suppose one is worth $9,000 and the other is worth $2500. Perhaps. That might be estimating it kind of high.

We don't have any equity in our house yet. Maybe we will have a little by the time we are ready to file. What if we do have a little equity in our house by then?

We are not ready to file yet. I worked a job that I won't have in the future but it would put us into Chapter 13 if we filed now.

But if the house is going to be an issue, then maybe I am wrong in thinking Chapter 7 might be right for us.

[moe]

I think I may have found the answer--Homestead Exemption in our state is $500,000. I just hope they don't make an issue of the fact it's a 2 family house.

[Charlie777]

I don't know the details for BK, but for mortgage financing, owner-occupied homes of 2 to 4 units are still considered the same as single family.

[justbroke]

A two-family home is your homestaed since you live in it. As you discovered, is is afforded protection under the homestead exemption. So long as you are current on your mortgage by the time your case discharges, you will be fine. Do not, under any circumstances, reaffirm the mortgage. Make sure you discuss the "pay and stay" choice when it comes to your home.

Check out the thread, "Why Reaffirming a Mortgage is a Very Very Bad Idea", which was started by one of our contributing attorneys. You'll be glad that you did.

http://www.bkforum.com/showthread.ph...-very-bad-idea.

[moe]

Yeah, I saw that thread. I didn't get all the debate but it didn't sound like a good idea so I definitely won't do that!

A lot of these threads are not that easy to figure out if you are a novice--that was one of them. But I gathered that it makes it possible for them to take your house and I want to keep my house.

[AngelinaCat]

Is your 'two family house' a duplex? Or are you renting a couple of extra bedrooms to your exchange students?

[moe]

It's a duplex AND we rent out rooms in our half of the house.

So there is an apartment that we have regular tenants in and then in our apartment we take in students.

[keepsmiling]

Keep reading and asking questions. You won't be novice for long!

Wow, 500K . Nice. We get a stinking 40 and change w/federal. NADA, zip, zero, bupkis from NJ.

[moe]

Lol...we have no equity but we refinanced with a HAMP and now have what you'd call a 'normal' mortgage. It's high but rent's high here too so it's not like we come out behind since the HAMP saved our butts....We didn't do GREAT, you know. We just got a normal 30 year mortgage with a 5.25% interest rate.

But we have NO equity in the house so the $500,000 doesn't help us. Still you are right--that is pretty rough with 40 and change. Basically, you aren't really giving people a fresh start or protecting families and keeping a roof over their head.

But given the way things are going, I'm glad they aren't instituting debtors prison.

[keepsmiling]

Btw, that's 40 and change if you're married. Half that if you aren't.

Your optimistic point is well taken, tho, so forgive my rant. Sometimes I just need to vent. The equity thing drives me crazy. We are in our house almost a quarter century and should have had it almost paid off by now. Instead, we used our equity to keep buying health insurance and now it will never be paid for.

NJ is and always has been my home, and I can't imagine living anywhere else, but sometimes this state just pisses me off. It's too bloody expensive for everything, especially $%^& insurance.

[moe]

That's really cruel then. So basically, you can be unemployed and then if you have ANY equity in your house...you have to pay it in Chapter 13? Dayum!

[IHateChase]

Well, if you were unemployed for any length of time, you'd be likely to be filing a 7.

[moe]

But then you can't keep your house, I think, if it has equity is the problem with the NJ law? But maybe I'm not getting it. The scenario I was thinking was some older person who had a house and faced unemployment but who bought at a time house payments were reasonable--then maybe his/her kids could help out with the mortgage but can't take on the humungous credit card debt that probably went up because

CHASE IS EVIL...like your user name says!!!

(Chase really screwed me big time also, by the way. )

So then this person loses everything, their house and everything to the &%$^ credit card companies instead of getting to at least keep a roof over their head and they are indigent.

Perhaps I am totally getting this wrong with the equity and the Chapter 7.

Just in my recent attempt to understand the difference between Chapter 13 and Chapter 7 it seems like if you are just squeaking into the middle class like a lot of people then bankruptcy can be really difficult. I'm super glad that people who are really hurting financially can get help. But it seems like they put certain people in a vice. But if you are a businessman and have gone into huge debt or you have HUGE debt, then you get to go into Chapter 7. Like, if you are super rich or poor you are OK but if you are a working person in the middle, watch out.

[keepsmiling]

No, I think you pretty much have it right.
There are any number of things about BK that are bass-ackwards.That's why this forum is such a blessing. It tries to make some sense of it all.