House exemption??

[phoenix44212]

Hi, Just to make sure I understand this. In Ohio the house exemption is $5K. If I file Chapter 7 and surrender the house and then the trustee sells it, do I receive that money or is that now available to creditors. I guess what I'm asking is that if I sell the house prior to BK and, for example, have a $5K profit that money should go to creditors but if the trustee sold it I could keep it. Is that correct?

[lrprn]

In Ohio the house exemption is $5K. If I file Chapter 7 and surrender the house and then the trustee sells it, do I receive that money or is that now available to creditors.

Situation 1: You file Ch 7 and declare you are going to surrender the house as a part of your bankruptcy. By some miracle, the house sells for more than necessary to pay off your mortgage (very unlikely). However, because the house is a part of your bankruptcy estate on the day you file, any extra from the foreclosure sale beyond $5K will go to your creditors.

Situation 2: You sell the house *before* you file and get enough to pay off your mortgage plus have some money left over. In this case, you can keep the money yourself....for now. Since the house has been sold before you file Ch 7, you are now trying to protect cash - that's harder than protecting a secured asset like a house. Any extra cash you get ahead of filing can't be protected unless you delay filing long enough after the home sale to whittle down the excess before you file to $2400 (the $2000 allowed by Ohio when no homestead is claimed + $400 cash allowed in your accounts) and you do so in ways that don't raise your trustee's suspicions after you file.

Hope this helps clarify things for you. It's a real shame that Ohio's bankruptcy exemptions are so incredibly stingy

[phoenix44212]

So, theoretically I can get more money (5K) by surrendering the house than selling prior to CH7 and trying to spend down the money to the exempt cash amount (and assuming the trustee agrees with my use of the cash). It's actually a moot point because I'm sure that there will be no money left over and above the first and second mortgage and associated costs in this market. The good news is I found a rental that my daughter and I like and have been ok'd to move in. It won't be long until I file and it will be nice to move on.

[CindyLou]

For all the trouble it sounds like it might be worth to get the $5000, you should probabaly move into the rental you found and let the bank have the house and move forward with the bk so you can get this whole thing behind you. Congrats on finding the rental!!