Pre bankruptcy

[yukon]

We have had a consultation with an attourney about my wife and I filing ch. 7 My main question was we have a rental house that has about 40,000 equity.
His recomendation was to sell it and take the money and pay down our 100,000 home equity loan. That sounds great but not sure it sounds right.
Our primay house which we want to keep has a 150,000 first and 100,000 home equity and the house appraises for 290,000. We are currrent on all payments but cc's. Sence the home equity loan does not have set payments or life of loan he says its ok. Any thoughts?

[OhioFiler]

Sounds like it will be a preferential payment. What happens when you end up with an additional $40K in equity on your primary residence? Do you have the exemptions to cover it?

[ecsclb1724]

yeah it sounds like you'd just be switching one thing of equity to another

[StartingOver08]

If you are selling your rental property and putting the proceeds into your current homestead, you may be transferring non-exempt property into exempt property. We don't know because we have no details about your state's exemptions.

If you do this you need a looonnnggg time between the time you sell your rental property and the time you file BK. In my particular case the trustee looked at 10 yrs of real estate transactions. I don't know how far they can reach back to claim funds from a past transaction. I am certain that transactions within one year and possibly within two years receive extra diligent review.

[lalap123]

Yukon,
If you put the $40K down on the HELOC then you will essentially be giving the trustee even more reason to take the equity in your primary residence (then you will essentially have around $80K in equity instead of $40K). He will already probably question the equity that you have there. I would seek another opinion.

[StartingOver08]

Yukon,
If you put the $40K down on the HELOC then you will essentially be giving the trustee even more reason to take the equity in your primary residence (then you will essentially have around $80K in equity instead of $40K). He will already probably question the equity that you have there. I would seek another opinion.

We don't know without knowing exactly where the OP is (which state) and what the exemptions are for that state. Here in Fl the homestead can have unlimited equity. In GA the equity is limited - but we don't know where the OP is located.

But, I concur with your conclusion - seek another BK attorney's opinion.