Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
You may not be able to file a Chapter 7.
1) How many are in your household?
2) Is there any other income coming into your household besides the $125K that you earn? If so, please indicate the source(s) and the amount(s).
Unless there are extraordinary circumstances - such as high medical bills - it is not possible to file a Chapter 7 if the total gross annual household income exceeds $68,676 for a family of 3 in California. Even if you were able to include the 2 children who moved out, the income limit increases to only $86,364.
Are you sure the Bankruptcy attorney recommended a Chapter 7 and not a Chapter 13?
When I met with the attorney (last week)I had a possible $100k in medical bills. This was outstanding and my insurance hasn't been willing to pay. So perhaps that is why she said chapter 7. This week my insurance paid $70k of the debt so I still have an outstanding balance of $30 or so. If I don't file chapter 7 and just go into foreclosure what would the tax implications be on the rental property. Would the lender come at me for recourse debt?
Perhaps I should keep that property and go into foreclosure on the primary residence?
When I met with her, I actually told her my income was $150k (higher than the actual). As for the rental, I understand the insolvency rule and think I might qualify for it. I am more concerned about having to pay back the second mortgage on that house. I have two lenders one for the first and one for the second. I assume that on each loan I would go into foreclosure but don't understand how this works out from a recourse vs non-recourse perspective. Any advice on that topic would be greatly appreciated.
A non-recourse mortgage is one for which the lender cannot get a deficiency judgment for the balance after a foreclosure. A recourse mortgage is one for which the lender can get a judgment for the balance after a foreclosure.
To be a non-recourse mortgage, the loan must have been used to actually purchase the home that was used as the debtor's residence (both qualifications are necessary). Mortgages that are re-financed, and home equity loans that are acquired after the house is purchased do not qualify for non-recourse status.
This means both mortgages for the rental property are recourse mortgages, and the lenders can get deficiency judgments for any balance after the property is sold in a foreclosure.