home equity

[Eemaw5]

I owe 71k on my home. It was just appraised for 96k. I'm in illinois so I have a 15k exemption. My other exemptions will be used on personal property i want to keep. From what I have researched, the expenses to sell the home, plus trustee fees would total more than the 10k in equity, assuming the house sold for what it was appraised for. do I have this figured right?

[justbroke]

There's no way to tell how much the home would sell for or the expense. Yes, you can estimate, but the cost to sell is going to be 1-3% due to the way the real estate commissions now work. Don't take the Trustee commission into account since it's a percentage of the net amount.

Example (if your numbers are solid): You sell for $96K with $2,880 in commission (3%) and say another 3% for incidentals (titles fees including recording fees) of $2,880. I assume your taxes and insurance are already escrowed into your mortgage payment so that would just get carried over on the sale (you wouldn't pay out-of-pocket for those). If your balance is $71K, then that's $96K - $71K = $25K. Net proceeds from sale would be $25K - $5,760 = $19.240.

You may be able to negotiate around that $19K potential net proceeds. I purposefully don't think about the Trustee fee because that is incidental to the distribution. Even so, on $19K in proceeds, the trustee commission would only be $2,650 leaving over $16,000 in adjusted net proceeds (after trustee commission).

Bottom line, there's going to be a "significant" amount of equity left over even considering the cost of sale and the trustee commission.

[Eemaw5]

Thanks for the reply. From what I have read, I would be allowed a 15k homestead exemption. I'm wondering if the amount that would be figured into a chapter 13 plan would be the difference between the amount owed and the appraised value of the home minus my exemption or does the trustee fee and other associated costs of selling come of the total amount of equity, thereby reducing the amount that is put into the plan.

[justbroke]

For a Chapter 13, the math is different. For a Chapter 13 they don't take any of the sale factors into consideration. Your "best interest of creditors" test (a/k/a the Chapter 7 liquidation test) would yield a value of $25K. (We'll use $25K for this example.) That means that your Chapter 7 would have to pay at least $25K over the life of the plan. The problem is if you're in a 0% plan... you'd still need to pay that $25K over the life of the plan. In a 36-month plan that would be a minimum payment to the unsecured creditors of at least $695/month. That doesn't include other mandatory plan payments (secured debt, arrearages, trustee fee, attorney fees, priority debt).

So, in summary, for a Chapter 7 you would need to figure out how to protect the $16K in proceeds. In a Chapter 13, you'd have to pay, at least, $25K to the unsecured creditors over the life of the plan.

[Eemaw5]

Am I allowed a real estate exemption in a 13?

[justbroke]

Am I allowed a real estate exemption in a 13?

Yes you would. My math may not be perfect. The amount you would need to pay would be based on how much you'd have to pay in a hypothetical Chapter 7. I did not apply the exemption in the Chapter 13 example; I just assumed that there was $25K exposed. In your case, you'd use your homestead exemption against the exposed amount.