2nd Bankruptcy and home loan not re-affirmed.

[ericsch]

Hello, I am stuck in a little conundrum! Does anyone know what to do when filing a second bankruptcy and still living in a home that was not re-affirmed in the first bankruptcy? I Presume we have to show proof of home payments but the house does not report to the credit bureau and is already a discharged dept. We have like 80 thousand equity in the home and not sure if the 2nd bankruptcy will force sell it to pay off creditors. Or can we just do the paperwork as if we are renting the home at the moment since its discharged?

[justbroke]

Welcome to BKForum!

I believe the issue you have is the equity unless Arizona has a nice way to protect that equity. I suppose how much is exposed would be a matter of whether you're filing Chapter 7 (liquidation) or Chapter 13 (reorganization). In either case, the equity could become the issue because you do own the home and you do have equity in the home.

The fact that it doesn't report to the credit bureaus, or that you have no legal obligation to continue paying, does not affect the calculation or protection of the equity.

[ericsch]

Do you think it would fall under ARIZONA’S HOMESTEAD EXEMPTION ACT? Or is that just for if selling the home? State up to 150000 can be protected up to 18 months from creditors if kept in a separate untouched savings account to be used for a new home. Also I guess the question would be is that still viable if its a discharged debt.

[justbroke]

The debt is discharged, not your equity. The discharge has nothing to do with equity. If Arizona has a $150K homestead exemption you should be able to use that. And please, use an attorney if you're going to file again. I would not you to make a mistake that costs you money.

[ericsch]

Thanks for the info. I think I will take your advice and work with a lawyer. I was going to do it myself since I had a previous one I could refer to when filling out paperwork, but I think the house side of it might complicate it and I don't want to miss something.

[justbroke]

Whenever there are assets involved, especially "juicy" assets, I always suggest an attorney. Simple bankruptcies where the debtor only owns a car, rents, and has several articles of clothing are easy to and nearly risk free (except maybe the car if it's owned outright). Otherwise it's not worth missing some important detail when having $$$ of equity in a home and that becomes exposed. Some Trustees may prey upon the uninformed debtor who may not understand the exemption statutes and rules.