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JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Is their any way for them to keep their home

Customer Question

My mother is 74 yrs. old. A couple of years ago they refinanced their house with Countrywide and their payments are $1300.00. They owe 187,000.00 on their house. Their social security and pention total approx. $25,000.00 a yr. They have a vehicle payment for $450.00 a month and another loan for approx. $200.00 a month. They have numerous credit cards that are near maxing out. They tried to sell their house last yr., but it didn't sell. Now the real estate agents tell them they could only get between $135,000. and 180,000. if it would sell. That is less than they owe. Mom has been using her credit cards to pay for their groceries and other expenses. She has not gotten behind in her payments yet, because she has been using her credit cards to make ends meet, but said that this is the last month she will be able to do so. It breaks my heart, to find this out when they should be enjoying themselves. We need advise for them.
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 6 years ago.

Hi want answer:

I'm sorry to hear about your parents' dilemma. Sadly, I am seeing a similar pattern more and more often lately.

Unfortunately, it is illegal to give advice to someone who does not live in a state in which an attorney is licensed to practice law, so I cannot give you advice. However, I can give you information to help you formulate questions to ask an attorney in your area about advice specific to your parents' situation.

First of all, bankruptcy allows one to discharge every type of debt you mentioned, so the likelihood that they can get completely out of debt is very good if they file bankruptcy. However, keeping secured loans (which are loans where there is collateral, such as the house loan and car loan) require the person filing bankruptcy to keep those debts if the person wants to keep the collateral.

So, if they want to keep the car, they will have to pay the secured creditor for it. In both Chapter 7 and Chapter 13, there are mechanisms your parents may qualify for to keep the car for less than they owe if the vehicle is worth less than the loan balance (in Chapter 7 called "redemption" and in Chapter 13 called "cram down"), but the loan has to be at least 910 days old for this to work in Chapter 13. If redemption/cram down is not applicable, they can usually keep the car if they continue regular payments in Chapter 7 (called "reaffirmation") or set it up to be paid in their Chapter 13 Plan.

The house is treated differently. To keep the house, they will have to continue regular mortgage payments. This loan cannot be redeemed or crammed down like the car loan, since residential loans are protected better than car loans in bankruptcy. Chapter 13 will allow them catch up arrears, but the basic loan payment per month will be unaffected. This is not completely true if they have a wholly unsecured second mortgage, but this does not sound like the case based on the facts you laid out in your question.

So, as a practical matter, if they cannot afford the $1,300/mo for the house, it is unlikely that they will be able to keep the home, even in bankruptcy.

I suggest you meet with an attorney in their area since their options are very fact-specific and they may have other options I haven't went over (such as a predatory lending claim).

I know I covered a lot, so if you have any follow up questions please feel free to ask!

I hope this helps and a positive feedback is always appreciated if this was useful to you.

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

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Attorney in the practice of Bankruptcy Law since 1996