Mortgages & BK

[JessMN]

I was discharged at the end of August and have recently been discussing bk with my sister - she and her husband are pondering doing it too. The situation is they are drowning in debt - her husband's 4 credit cards are in default though my sister's are paid up to date but they don't have the money to pay his cards to even save anything in case of emergency. He is a relapsed alcoholic - and a lot of the relapse is due to the money situation. He is at that point of despair where he is being an ostrich - hiding his head in the sand and not dealing with the creditors. He has one judgement already and another coming and is most likely going to be garnished soon, which will make their situation worse.

Their situation is somewhat different than mine was and while I have encouraged her to join the forum, idk if she is going to do it any time soon so I thought I would ask a few questions for her.

First, they have a mortgage and are up to date on it and would keep the house. They have 2 mortgages on it and owe about $80k total she said and have probably $40-50k equity in it. I gave up my house so I am not sure the ins and outs of how mortgages work. I have seen people say not to pay anything - cards, mortgage, etc once you decide to file bk, but shouldn't she keep paying the mortgage and just do a ride through? And cars too? They have 2 older cars (I know hers is a 2001, his is about as old) - I don't remember if they have 2 loans still or not, but they would want to keep both so wouldn't they just keep paying? (my car was paid off and practically worthless so I didn't have to deal with this either!)

OK, I think those are the main things I couldn't answer.

P.S. I did tell her to see a credit counselor and/or lawyer to get an idea of her options.

Thanks!

[BKAttyMI]

Her #1 priority if she wants to keep the home is stay current on the mortgage, forget the credit cards if necessary. It might be possible to do a lien strip on the second mortgage, she'll have to see an attorney in her area though to see what the options are. There's no reason to suffer, help is out there, I find most people let out a sigh of relief when I tell them what options they have.

[ValleYum]

@BKAttyMI: With 40-50k in equity, would a lien strip even be possible? Luckily, Minnesota has a generous homestead exemption - so hopefully they could exempt all of their equity in a Chapter 7 and keep their home as long they keep paying their mortgages like you said.

The vehicle exemption in Minnesota is $4400 (if they still owe a payment on either car - the equity is the car's value minus the amount owed) - if they both file they *may* each get that exemption since they have 2 vehicles.

They definitely should check with a local attorney or credit counselor ASAP - hopefully that can relaunch his recovery once the relief that correcting their $$ problems becomes apparent to your BIL.

I wish them well, Jess!!

[JessMN]

Thanks both of you!
@valleYum: I was reading on the MN statutes site that the exemption for a car in MN is $2000, and I think I remember that was the case when I did mine, though I have read on numerous sites its $4400, like you said, I figures we should go by what the MN statutes site says though.

[ValleYum]

Subd. 4a.Adjustment of dollar amounts.

(a) Except for subdivisions 5 and 7, the dollar amounts in this section shall change periodically as provided in this subdivision to the extent of changes in the implicit price deflator for the gross national product, 1972 = 100, compiled by the United States Department of Commerce, and hereafter referred to as the index. The index for December 1980 is the reference base index.... <snip>

The amounts adjust per the Minnesota statute as written above (~ every 2 years). Trouble is, the Commissioner of Commerce publishes the adjustments and they aren't written into the law itself - just as an amendment to the law. Craziness.

You can see the updated figures here: http://mn.gov/commerce/banking-and-f...ar-amounts.jsp

[JessMN]

Awesome!
Once again, thanks - and I will bookmark that site

[BKAttyMI]

It completely depends on the balances of the mortgages on the property and the property's actual value on the market. A visit to competent local counsel can lay out any options they may have.

[ValleYum]

It completely depends on the balances of the mortgages on the property and the property's actual value on the market. A visit to competent local counsel can lay out any options they may have.

Thanks for taking the time to answer! It's appreciated!!