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Guru_Guy, Attorney
Category: Bankruptcy Law
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Experience:  Years of experience providing advice on bankruptcy and other alternatives to debt problems.
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question - My big brother is in about 900k worth of

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question - My big brother is in about 900k worth of unsecured debt credit cards bank loans etc & his business is about to go under out of business he owes me like 20k ish im not worried about getting my $ i am more worried about him & my nephew & niece keeping there home he owes about 800 and its worth about 700 in todays market he homesteaded his house 6 years ago he lives in california also he is behind aprox 60 days on his bills he has another home he is letting go back to the bank that was a rental investment 100 days past due he is in extreme bad shape I am trying to help him emotionally by telling him they cant take you & the kids house if you keep up on the payments which I have been helping him do so i know thats only about 30 days behind please tell me I am telling him the right thing to do I am worried as he got a divorce last year he is a wreck , he has no money for a attorney to file bankruptcy and im not sure if that is the way for him to go yet please help ,lil sister
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  Guru_Guy replied 6 years ago.
Hello,

It sounds like your brother is in a very bad financial situation. If there is no significant hope of him getting his income situation turned around, bankruptcy may be his best option.

You say he cannot afford an attorney, but the costs of an attorney could be paid out of what his is probably currently paying to creditors over a month or two. Protecting the house also seems rather pointless since he owes more on it that it is worth. He would effectively be paying $800,000 for a $700,000 house.

I know bankruptcy can be a difficult step for many people, but in some cases it is the only way to get a clean start for someone who is hopelessly over his head in debt. Sure, it messes up your credit, but since he is headed for one, and possibly two foreclosures anyway, as well as multiple other defaults, his credit will already be destroyed. Bankruptcy offers a way out from under this debt.

I would suggest he see a bankruptcy attorney for a free initial consultation. They will probably come up with a plan where he can save some cash for the attorney by stop paying all bills, then file the bankruptcy.

I hope this helps!


___________________

Please keep in mind that information in this forum is for informational purposes only. It is not legal advice and does not constitute creation of an attorney client relationship. Before acting on any such information, you are always advised to consult with an attorney licensed to practice in your jurisdiction who can take the time to review all the facts and laws relevant to your situation.
Customer: replied 6 years ago.
Reply to Guru_Guy's Post: yes it helped but i the main question was can he legally keep the house with it being homesteaded ? as it has been in the family for many years he pulled out the equity for his business I will buy it for 900 if I have too I just need the facts please
Expert:  Guru_Guy replied 6 years ago.
The problem is the secured debt on the house means that that debt cannot be discharged in bankruptcy unless he gives up the house. It sounds like that money is the bulk of his debt. He could reaffirm the secured debt in bankruptcy and get his other debt discharged. But he would still be required to pay off all that secured debt. Otherwise, he could not keep the house.

If you were willing to buy the house at a price that would pay off all the debt, that certainly would be allowed. However, you should not have to pay that much. You might be able to work out a "short sale" where you buy the house at its current market value, which sounds like it is less than the amount due on it. Banks will often do this to cut their losses on an over leveraged home.

The other option is to wait for the bank to foreclose on the house, then buy it at auction. You could probably pay a lot less if it goes to auction, but there you face the risk of being outbid.

So the botXXXXX XXXXXne is he cannot keep the house unless he pays off all the mortgages. If he gives it up, your best bet keep the house at the best price is to see if the creditors will allow a short sale of the property at its current fair market value.


___________________

Please keep in mind that information in this forum is for informational purposes only. It is not legal advice and does not constitute creation of an attorney client relationship. Before acting on any such information, you are always advised to consult with an attorney licensed to practice in your jurisdiction who can take the time to review all the facts and laws relevant to your situation.

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