My mom put down the money on our house

[lostgirl1]

Hello all! I'm new this and still deciding if chapter 13 is the way to go. Here's one of my dilemmas...My mom,my husband and myself are on our house. Mom is 81 and lives here full time. She put down the 90,000 to buy our house 11 years ago. Can we protrect her money and not have the 90,000 count into the equity in our home?
The house is worth 265,000 and we owe 110,000. Leaving 155,000 in equity.
Thanks for any help or ideas.

[DebtEnder]

How do you know the house is worth 265k? Has a appraisal been done on the home or you going by assessed value or some other method? The house may not be worth nearly what you think it is. This is a good thing for you.

Based on the State of Illinois homestead, your house, is exempted 7500, this can be doubled for married couples. I would think if your mom is in fact on the title as well she could add her 7500 as well. This protects 22,500. In other words if the house is still worth over 200k then the house in a ch7 would be sold and the three of you would get 22,500 back rest going to pay creditors. In a ch13 if the house is truly worth 265k you plan would have to pay back the 155k minus 22,500 exemption within the 5 year plan. Creditors have to paid at least as much in a ch13 as they would in a ch7 liquidation.

Your best bet is to find the TRUE value of the house, a CBO is the LEAST valuable method to do this. A CR appraiser doing a 90 day liquidation appraisal is your best bet to find the real value of the house. It also holds up well in court as well it's an appraiser, their only job is to prove value of property. If the house is worth far less then you think, say 150k or less, then once you add in exemption amount and selling fee's, there might not be anything left for a creditor.

[DebtEnder]

Wanted to add there are some wildcard exemptions as well that you could possibly tack on to the homestead in the amount of 4k each, I think. Ask an attorney in your state to be sure.

[lostgirl1]

Thanks for such a fast reply. I had the house apprised 5 months ago trying refinance my house. My moms not filing. Do you know how to protect her 90,00? I have proof that she put the money down. It came from her bank account. Can that be deducted from the 155,000 bring our equity down to 65,00? Thanks again!

[DebtEnder]

A refi report tbh is rarely worth the pixels is was typed out in. I am not a CR but my best friend is and I have dabbled my fair say in appraising. That 265k how much different was that from the value you were HOPING to get out of the house. If you bought the house 11 years ago and it still worth about what you bought it for back in 2000 then you are one of the .01% of homeowners with this situation. Do a quick look for listings in your area of best you can tell similar houses. Then if the numbers are far lower get a real report done, you want a quick sell value, not a refi, ideally get a appraiser who specializes in foreclosure reports for the banks.

As far as the 90k as far as the BK court will concern itself it is no different then if you had put down 90k. Your exemption is your exemption. If you want that cash out you'll need to sell the house yourself and spend it down to your exemption amount before you file.

[despritfreya]

In a Chapter 7 the 90K will be considered a gift and the equity of the home will be spilt 3 ways (if the title gives all three equal shares) therefore, if your value is accurate, you and your husband have approximately $103k in equity. You can argue with the Trustee over this but, my guess is that you will run out of the financial ability to fund the battle.

In a Chapter 13 you could try to deduct the $90K off the top and then split the balance in half arguing that you and your spouse together have a ½ interest and mom has the other ½. Since a Chapter 13 Trustee's job is not to liquidate, you may get it past him/her - unlikely but more likely than if you filed a 7.

How much debt do you have? If you can fund a 100% Chapter 13 (or, if the non-exempt equity totals less than 100%, the reconciliation amount) the issue goes away. Of course, depending upon the amount of debt, dealing with creditors one-on-one and not filing may also be an option.

Des.

[lostgirl1]

Thanks for all the great info everyone!