House Exemption Question

[given2fly]

Ok, I have started Chapter 13 process with my lawyer. I am gathering all the paperwork and getting a CMA done on my house.

WA State shows a homestead exemption of $40K. I will be coming in close to that for equity in my house.

Houses in my neighborhood have been selling for 299K to 315K. The mortgage is 275K, (that is what I owe.). So anything over 315K would be over the exemption. But it's close, and the way the market is moving here, my house could be worth 320, just unsure.

I am filing joint with my wife, does that up our exemption at all?

What would happen if we were a couple grand over the exemption?

Could we utilize some of the wildcard exemptions to cover for this?

[LostOne0069]

Remember that you have to figure in the cost of selling it... so you could be at $330k or more as far as value goes and be OK.

[given2fly]

Wow, so they allow for the cost to sell your house? Is that stated somewhere?

[LostOne0069]

I'm sure it is... after all, once the mortgage and sale costs are paid... and yes, they have to pay the sale costs or no one will handle the sale for them... then YOU get your $40k... THEN the trustee gets what's left over.

[given2fly]

In our case it's a chapter 13 case and we are keeping our house though. So would that cost of sale buffer still apply in my case? Sorry for all the newbie questions.

[anonymuse]

I've seen it in books, but not anywhere in the law, that thecommission and closing costs can be deducted. I've seen these amounts deducted in a Colorado case that they posted a recent "opinion of interest"; however, the opinion was not pertaining to the amounts deducted.

When I went to a BK seminar held monthly by the courts here by a trustee, someone from the courts was observing and spoke to me later that even if I miss out and have $1,000-$2,000 extra in equity, I could "buy them out" and still retain my house and be able to qualify for Chapter 7.

I am not a lawyer so I'm not sure what to make it all, but this is the part that well determine whether my case will by Ch 7 or 13.

[LostOne0069]

If it's chapter 13 then there's not as much to worry about... You don't normally lose assets in a chapter 13. The exemptions are for chapter 7 where they gather up your belongings and sell them to pay your debts.

The way I understand it, In a 13, the only thing that can mess you up is that any value that you have over and above the exemption limit... that would normally go to the creditor if the trustee sold your house... will have to be paid to your unsecured creditors.

Example: You own a house worth $200,000. You owe $100,000 on the house, so you have equity of $100,000. Say your exemption is $75,000, leaving $25,000 that would normally go to creditors in a chapter 7.

Your payment plan to your unsecured creditors will have to pay back at LEAST $25,000 over the life of the plan.

In this situation (chapter 13) I do not know if the sale costs are included. Of course, I'm not a lawyer and everything I've said could be completely wrong! I'm pretty sure that what I've said is accurate, but you can really set your mind at ease by just setting up a free consultation and talking with an attorney.