Two properties... BK7 or 13?

[BillyRip]

OK, here is a brief rundown.

$80K in unsecured debt.
About $10K upside down on the condo I live in.
About $40K equity in a townhome my brother "rents" from me. I net about $500-600 a month on it.
About $15K upside down on a 2006 Ford that I would like to keep. I believe I purachsed it in June '06. I think I have to keep it because how do I get another car after I file?

My Atty says I walk away from the condo and make the townhome my residence, and I might squeak by on a 7. If not he says we convert to a 13. I guess at that point I would want to keep both properties, but I simply CANNOT lose the townhome my brother lives in.

If I go 13, can I keep the townhome? can I keep both properties if I choose? Even though I am upside down, I'd like to have the tax deduction and pay a mtg rather than a higher 13 payment.

Thoughts?

[justbroke]

If I go 13, can I keep the townhome? can I keep both properties if I choose? Even though I am upside down, I'd like to have the tax deduction and pay a mtg rather than a higher 13 payment.

You can absolutely keep the townhome in a Chapter 13... but... you'll have some interesting issues.

First, in a Chapter 13, your unsecured creditors must receive at least as much as they would have received had you filed Chapter 7 and liquidated your non-exempt assets. That means, the $40K in equity must be paid to unsecured creditors over your 36 to 60 month Plan duration.

Quite simply, your Plan payments would already be at $666.67 (owe 60 months) for that $40K in equity.

Your car you should be able to cramdown (if you wait until after February 1 to file). This will bifurcate your claim into a secured portion and unsecured portion.

However, I haven't even got to the point where you may have to pay back 100% anyhow. I'm assuming you're single and above median income earner? Without alot of expenses (IRS Allowable Expenses) you could have a lot of your income deemed disposable income and committed to your plan.

Now, let's add the $500-600 net receipt (income) from your rental property. Now you're really in a 100% plan, because now you're paying $30K to $36K from these excess proceeds, on top of the $666 a month or $40K from the equity. That's puts you pretty close to a 100% plan.

Disclaimer: this is based on if you keep both Condos. I made a bunch of assumptions too... like no family or dependents. If you decide to only keep the Condo your brother is (and make it your homestead), then you can probably exempt some portion of the equity. This varies by State.

[BillyRip]

As long as I can CHOOSE which property to keep, I'll do what I have to do.

I just simply have to keep the townohouse. I'm too upside down on the condo. I will walk away from it if it helps me get into a 7. If I can't do a 7, I'll keep both I guess. Better to pay a mtg than a Trustee, right? Will they take the the loss of property value into account?

I guess the Atty & Trustee will do the math, right?

Also... If I make the townhouse my residence, I believe Colorado allows a $40K homestead exemption, and... I won't be collecting rent anymore, so that net income would be gone. I think that's why my Atty is trying to squeak by on a 7.

Thanks for your help JB!

[justbroke]

As long as I can CHOOSE which property to keep, I'll do what I have to do.

I just simply have to keep the townohouse. I'm too upside down on the condo. I will walk away from it if it helps me get into a 7. If I can't do a 7, I'll keep both I guess. Better to pay a mtg than a Trustee, right? Will they take the the loss of property value into account?

I guess the Atty & Trustee will do the math, right?

Also... If I make the townhouse my residence, I believe Colorado allows a $40K homestead exemption, and... I won't be collecting rent anymore, so that net income would be gone. I think that's why my Atty is trying to squeak by on a 7.

Thanks for your help JB!

Yes, hopefully you get get squeezed into a Chapter 7!

It is always better to pay down SECURED debt, especially a homestead (home), rather than give it to unsecured creditors...

This is exactly what I've done. I've gone from a 70%+ plan to a 2% Plan, with all my money basically going into my homestead. I hpe to be debt free at the end of 5 years... AND to top it all off, actually have some equity in my home!!! Not a lot of people can say that.

[danaf]

Do you have to file right away? It might be good to wait 6 mos until that 500-600 that you 'net' falls off your income levels. This might help getting into a 7.

[BillyRip]

Do you have to file right away? It might be good to wait 6 mos until that 500-600 that you 'net' falls off your income levels. This might help getting into a 7.

Well... If I go 7, it will fall off as my primary residence will become the townhome I am renting to my brother and a roommate.

I still don't think I will squeak by. I just did the means test online and I'm way over. I might get around 50-60% on $80K. Just a guesstimate though.