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Maverick
Maverick, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy Law With An Accounting Degree - 13 + years as civil lawyer
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I live in Texas. I understand that in a Chapter 7 bankruptcy,

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I live in Texas. I understand that in a Chapter 7 bankruptcy, I can reaffirm a debt if my lawyer and the trustee agree that the payments would not be a financial hardship. Let's say I own a rental property, with tenants who pay me rent. There is neither a positive nor negative cash flow...the rent just covers the monthly payment. There is say $20,000 in equity in the house. It is not my residence; not a homestead. Can I simply reaffirm the mortgage, thereby keeping the equity out of the hands of the court?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  Maverick replied 5 years ago.
When you file a chapter 7 bankruptcy, you are typically only entitled to keep exempt property. Anyhting over and above that is subject to being sold by the trustee to pay first the secured creditor and then the unsecured creditors. Here are the list of exemptions for Texas:
http://www.naldp.org/download/exemptions/Texas%20EXEMPTIONS.pdf

First take for example a State where the homestead exemption is say $15k (Texas is different in that it does not appear to have a monetary limit)and someone has 20k of equity in the home. Even in this homestead situation, a creditor could force a sale of the home and give 15k to the debtor and collect the remaining 5k to cover his claim.

It does not appear to me that there is an exemption that would apply to your rental home. So if there is equity there to be had, it is likely that a creditor/trustee could force the sale, give the mortgage holder his share and use the balance to pay creditors. In other words, you reaffirmation would not preclude a third party creditor or trustee from forcing a sale to get the proceeds.

JA experts are not permitted to have outside communications with JA customers. However, you may be able to find a bankruptcy attorney in your area to further assist you by going to www.martindale.com.

Please click “ACCEPT” so I may get credit for my time. If you have a follow-up question, I would be happy to address it for you at no additional charge.


Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 3525
Experience: Bankruptcy Law With An Accounting Degree - 13 + years as civil lawyer
Maverick and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you. I figured it would be too easy to shield money that way! Payment is on it's way to you.

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