Value of Home

[nohope]

Am I correct in that the equity you have in your home should make the difference between filing chapter 7 or chapter 13? Am I also correct that equity in your home is the difference between its value and the amount owed, that being, mortgages, liens, etc? (I guess if you file a chapter 7 and are forced to sell you home, the realtor commission, closing costs, trustee fee effect your equity; is that correct?)
If one has lower equity in their home, does this mean their payment plan for a chapter 13 would be lower monthly payments?

[newbie2]

Qualifying for a Chapter 7 has nothing to do with the equity in your home. If you have more equity in your home than you can exempt then you may want to file for a Chapter 13 to protect it. For example: You have $20,000 in equity in your home that is above and beyond your exemption. If you want to hang on to it you would have to pay in to a Chapter 13 plan $20,000 to be distributed to your unsecured creditors.

Your equity is determined by the value of your home, less the amount of the outstanding liens. (I have not heard of a trustee allowing realtor fees, etc to be deducted from the equity. )

[LadyInTheRed]

Am I correct in that the equity you have in your home should make the difference between filing chapter 7 or chapter 13?

Not necessarily. It's possible it can be a consideration if you want to keep the home, can't exempt the equity and can't buy the non exempt portion from the chap 7 trustee. But, whether it should make THE difference will depend on your circumstances.

Am I also correct that equity in your home is the difference between its value and the amount owed, that being, mortgages, liens, etc?

Yes, except I'd delete the "etc." equity = value minus mortgages/liens.

(I guess if you file a chapter 7 and are forced to sell you home, the realtor commission, closing costs, trustee fee effect your equity; is that correct?)

No. The costs of sale are not included when determining your equity. But, the trustee may abandon the property if the costs of selling it decrease the proceeds of sale to a point that it's not worth the trouble to sell it for distribution to your creditors. A bankruptcy attorney with experience with your local trustees can give you an idea of how likely a trustee is to go after your home.

If one has lower equity in their home, does this mean their payment plan for a chapter 13 would be lower monthly payments?

Not necessarily. During the life of your Chap 13 plan, your unsecured creditors must get paid at least an amount equal to your non-exempt equity. To put it another way, unsecured creditors must get at least what they would in a Chap 7 liquidation. Paying all of your disposable income to the plan very well may accomplish that. If it doesn't, you would need to adjust your expenses to make it look like you have more disposable income to have a feasible plan. So, in that case, more equity would mean a larger plan payment. Artificially lowering your expenses to create enough disposible income to fund a feasible plan will make your plan more difficult to complete. So, you need to be very careful about choosing a Chap 13 over a 7 only to keep the non-exempt equity of your home.

[keepsmiling]

FYI-- I was told by a bk attorney that the "magic number" in NJ was $25K over and above equity before they want the house- if that helps.

[nohope]

Equity in my home is over 10 times $25K. How is the initial sales price set by the trustee and who decides if there should be a reduction in price?.....

[despritfreya]

If the equity in your home is above your allowed exemption and you do not want to run the risk of losing the home, simply do not file a Chapter 7. If you wish to file bk and keep your non exempt property you file a Chapter 13 (or Chapter 11 if you are over the 13 debt limits) and pay the value of the non exempt property to your unsecured creditors over the life of the Plan. If your non exempt property has a value of $200k but your unsecured debt adds up to something less, then you would be a 100% Plan.

In valuing non exempt property you do not deduct the "cost of sale".

Des.

[nohope]

Chapter 7 has already been filed. It's my understanding that the homestead exemption in NJ is around $20,000, using the federal amount.

[despritfreya]

Chapter 7 has already been filed. It's my understanding that the homestead exemption in NJ is around $20,000, using the federal amount (and from your previous post) Equity in my home is over 10 times $25K .

Then the 7 Trustee is going to sell the asset and give you your allowed exemption. Only way to stop this is to try to convert to a 13 (or 11 if over the debt limits).

Did you understand this issue before you filed? Was this discussed with your attorney?

Des.

[keepsmiling]

I know you really want to keep your house. Not sure if this is possible or makes sense, but can you -- convert to a 13, dismiss, put the student loans into deferral, and possibly take out a HELOC?

[nohope]

The answer to both your questions is no! In fact, I was told the student loans would be paid off in full - that seems unlikely now.

[despritfreya]

The answer to both your questions is no! In fact, I was told the student loans would be paid off in full - that seems unlikely now.

Wait a minute. If this was in response to my questions, you were well aware of the issues as it relates to the sale of the home in the Chapter 7.

http://www.bkforum.com/showthread.php?61501-Selling-Price-for-Home

Via another one of your posts (granted it was just last month), you also know how the proceeds will be distributed.

http://www.bkforum.com/showthread.php?68331-Selling-Property

Des.