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If I file chapter 7 or 13 bankruptcy which house will they take?

Asked almost 3 years ago - Saint Clair Shores, MI

I bought a home 3 yrs ago for $300K that is now only worth $180K. I currently owe $245K on it and I am underwater on it. I want to buy another home worth $40K and want to move in it as my primary home. I still have my job with great credit, and I can handle both payments, but if I lose my job, can I still keep the $40K home and let the $180K go into foreclosure and walk away if I file chapter 7 or 13 bankruptcy? Or, will the BK trustee they take both homes?

Also, if I buy the $40K home, should I pay cash, if I can, or should I use a 2nd mortgage borrowing money from the first home? Also, If I paid cash for the $40K home, would the BK trustee liquidate the money I put into the $40K home if I paid cash?

I'm trying to prepare myself for any bad times coming... since my job is uncertain. If I lose my job, I'm worried I won't be able to handle the two house payments and would have to file bankruptcy. Thanks

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John M. Kaman

Reputation Level 20

Answered almost 3 years ago. Criminal Defense Attorney in San Francisco, CA.

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You should see a MI real estate attorney to find out whether MI has deficiency legislation. If it does that means the lender can only get what they can sell the house for as long as it is your primary residence. That would seem to argue that you should live in the more expensive home. Otherwise if you are not living in it and they foreclose they can come after you for the balance. This question really demands a MI real estate attorney.

John M. Kaman

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