Question Idaho Homeowners Exemption $100000

[crazy4kirsti]

Hi,
We're retired. We live in Idaho. We have no mortgage. Home value $150000. Idaho homeowners exemption $100000. We're doing ok, for now, but if down the road, we needed to file a chapter 7, is there any way to stay in our home, other than coming up with $50000. Would a reverse mortgage for $50000, bringing the equity down to $100000, keep us in the house. Thanks

[flashoflight]

The act of adding another mortgage to your home on the eve of bankruptcy could be seen as an action to hinder, delay, or defraud your creditors which would make you ineligible for the discharge. It depends if you are solvent at the time you take out the mortgage and stay current on all of your payments for a few months afterwards. If you already have lates and can't get current, you're looking for trouble. And how are you going to spend down the advance in a way that isn't primarily to hinder, delay, or defraud the creditors?

You may also consider hiring a full-blown appraiser recommended by your bankruptcy attorney just before you file but $50k of equity is a lot when houses are worth $150k. You can subtract transaction costs when determining whether the trustee should abandon but not the buyout cost. A random appraiser off the street will probably not work.

[justbroke]

Welcome to BKForum!

Actually a little twist on what flashoflight wrote. How about the Chapter 7 Trustee sees those payments as nothing more than equity payments -- which they are -- and the payments are property of the bankruptcy estate and therefore put you into a Chapter 13. Those payments all go into the plan, plus whatever else is necessary (such as your disposable monthly income). Worse, the Chapter 7 Trustee seeks to accelerate the payments (getting all $50K up front) and you're left with a $50K mortgage.

It is an interesting theory. I wonder if anyone has tested this.

[crazy4kirsti]

First, I want to thank you for your time & knowledgeable feedback. This is an awesome forum. This community, provides a lot of comfort and knowledge. Like I said, we're doing ok for now. Have great credit scores. Never been late and are current on everything. Living off SS and a small IRA, but if something big, healthwise were to happen down the road, a chapter 7 might be needed, but don't want to be homeless.

My thinking, is get the $50000 reverse mortgage now (which doesn't have to be paid back, until we die or sell the place), and use it to pay down debt ($16000 of CC debt), living expense , health insurance and medical bills. If a chapter 7 were to be needed next year or 5 years from now, our IRA & SS would be protected, and would we be able to keep our home? A chapter 7 does not trigger a default, on a HECM loan. I know there is a lot of speculation on my part, but just trying to plan for the unknown.

Thanks

[justbroke]

If this isn't for a while and you understand what you're doing with a reverse mortgage, then that could be a good plan. However, at the end of the day you will have a mortgage of (up to) $50K and I don't know how you want to deal with that down the road.