Contemplating Chapter 7 on condo with underwater mortgage. Already received foreclosure summons from bank, although foreclosure sale date not set yet. Condo worth about 39K, owe 53K on mortgage plus 29K on HOA lien. Need to preserve 5K savings account, my only asset
Your question raises a number of questions. Are you still living in the condo? Where do you plan to move? Will you have to pay rent once you move? If you will have to pay rent once you move there is no reason to move until the mortgage company forecloses. You should contact the mortgage company and speak to the loss mitigation department. Some mortgage companies have a keys-for-cash program. They will pay the borrower to move out.
When to file raises a number of issues. You want the property out of your name because property taxes and HOA assessments are the responsibility of the legal owner of the property. Until the bank forecloses, you are the legal owner. If you file bankruptcy and the bank does not foreclose for another year, you could be responsible for the post-petition property taxes and HOA assessments.
Your social security benefits should be exempt provided they are not commingled with other funds. You may need to open a new account and redirect your benefits to that account. Do not deposit any funds in that account other than your benefits.
You need to do some pre-filing planning. Before doing anything contact a local bankruptcy attorney and schedule a consultation. Most bankruptcy attorneys will provide a free initial consultation. You can search for an attorney using the Avvo "Find a Lawyer" link at the top of this page.
Nels Hansen is a bankruptcy lawyer in Austin Texas and accepts clients in Austin, Georgetown and Pflugerville. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code and have done so proudly since 1996. The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Answers provided are for general discussion only and are not to be considered legal advice and they do not create an attorney-client relationship.
It's hard to say for sure without knowing more about your situation, so I will have to make certain assumptions in answering your question.
First of all, you are contemplating a Chapter 7 filing so I assume that you do not intend to keep your home and you have moved out or you are prepared to move out. As you may be aware, Chapter 7 is not typically used to save homes from foreclosure. If you intend to save your home, you should consider Chapter 13 bankruptcy instead.
Assuming that you qualify for Chapter 7 relief, a Chapter 7 discharge would wipe out your personal obligations for the mortgage loan as well as HOA fees that accrue before you file your case. You will likely be liable for HOA dues that arise after you file your case until you no longer own the property. Therfore, it may be best to file bankruptcy after the foreclosure sale is complete so that you completely discharge both your mortgage debt and your HOA debt.
As for your $5,000 in savings, it is likely not your only asset -- otherwise you would be arrested for public nudity as soon as you step outside. :-) I'm joking, of course, but my point is that EVERYTHING that you own is an asset to be included in your bankruptcy schedules, including your clothing.
That said, it sounds like you are primarily concerned with keeping your $5,000 in savings. Assuming that you are single, the savings account belongs only to you, you intend to walk away from your home, and you have been a Florida resident for at least two years, you could likely completely exempt the savings account balance by combining your $1,000 personal property exemption and your $4,000 wildcard exemption.
This is, by its nature, a somewhat generic answer and not legal advice. I recommend that you speak with a bankruptcy attorney to get legal advice tailored to your situation before you take action.
DISCLAIMER: I hope that you find this answer helpful, but be aware that this is not legal advice and should not be relied upon as such. Answering this question does not create an attorney-client relationship. I am not your lawyer unless and until we have entered into a written and signed engagement agreement and you have paid the agreed-upon retainer fee. For legal advice, consult your attorney. My law firm is a debt relief agency, helping people file for bankruptcy relief under the Bankruptcy Code.
If the condo is your current homestead and you are surrendering it and have no other real property that you intend to make your home, you will be able to take advantage of the $4000 wild card exemption for personal property. However, this includes all personal property, clothes, jewelry, collections, home furnishings, and other things around the house. You also have to keep in mind if you have an equity in your vehicle over $1000 that will need to be protected as well.
You may be able to keep a large portion of you savings, but it is unlikely you will be able to keep all of it. Contact a local bankruptcy attorney to go over your situation. Most of us have free consultations.
Are you interested in keeping your 5K, completely erasing your HOA debt and still staying in your home ? This may still be an option. You should speak to a bankruptcy attorney as you may not have to choose between your property and liquid money.
Most of my clients have learned that Bankruptcy has been the best option.
Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who can pay back at least a portion of their debts through a repayment plan. Many debtors choose to file for Chapter 13 bankruptcy because it offers many benefits that Chapter 7 bankruptcy does not.
In Chapter 13 bankruptcy, you get to keep all of your property including nonexempt assets. In exchange, you pay back as in most cases, only a small portion of your debts through a repayment plan. The plan amount you must pay back depends on your income, expenses and types of debt.
If certain conditions are met, you can use a Chapter 13 bankruptcy to cram down the loans on your investment properties or your car. A "cramdown" in a Chapter 13 bankruptcy allows you to reduce the principal balance of a debt to the current value of the property. Cramming down your loans through a Chapter 13 bankruptcy may also allow you to reduce your interest rate and stretch your payments out over a longer term in order to lower your monthly payment.
Lien stripping is a powerful option in Chapter 13 that allows people who are upside down, meaning your mortgage exceeds the value of your house, to get rid of their junior liens such as second mortgages or past due association fees. Through a lien strip, the bankruptcy court essentially takes your second mortgage and converts it to an unsecured debt, just like a credit card debt, by ordering the lender to remove its lien from the property and in essence eliminating their right to foreclose or reposes.
A chapter 13 also offers a “cure and maintain” option. In essence, you repay past due mortgage, HOA, tax debts, alimony or child support payments in a bankruptcy plan over a 3 to 5-year time period while at the same time making the ongoing future payments.
In Chapter 13, you do have the right to voluntarily dismiss your bankruptcy if you change your mind or can no longer afford payments.
The Chapter 13 bankruptcy generally will lead to a discharge and completion in approximately 3 to 5 years.
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This is a time sensitive thing. You want to maximize your time in the condo and the savings. So you need to meet with an attny ASAP. If you pay an attny, he/she should be able to preserve a good bit of the 5k.
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