How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask cfortunato Your Own Question

cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
14232603
Type Your Bankruptcy Law Question Here...
cfortunato is online now
A new question is answered every 9 seconds

I own two properties in CA- my primary residence is worth $250k

Resolved Question:

I own two properties in CA- my primary residence is worth $250k and I have $550 owing (purchase money only). The rental property is worth $125K and I owe $300k (this is not purely purchase money loans. I refied both the first and second and took money out on the second). I have about $10k in credit card debt and $30k in medical bills. I have $12k in checking and savings and $80K in IRA accounts. I haven't filed taxes for 2010 but would get about 20K back if I did. If I file chapter 7 what happens to the money in my checking/savings and to my potential tax refund. If I don't file bankruptcy, I can foreclose on the primary residence and walk away clean. On the rental, I would owe taxes on the forgiven debt and possibly have the lender come after me for recourse debt. What is the best option for me? I currently make about $125K per year
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.

Hi JACustomer,

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).

Customer: replied 3 years ago.
There are three in the household currently (two kids just moved out last week). I am in a domestic partnership so from a federal perspective I am single. I am the sole income but I do get an additional $1800 in rental income each month.
Expert:  cfortunato replied 3 years ago.

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?

Customer: replied 3 years ago.

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?

Expert:  cfortunato replied 3 years ago.
Whether or not a debtor can file a Chapter 7 depends on the debtor's income, not on the debtor's debts. Perhaps the attorney was not aware of your income level.
In any event, whether you would have to pay income tax on the difference between what you owe on the rental property and what the property sells for in a foreclosure depends on whether and by how much you were "insolvent" when the property was sold. "Insolvent" means your total debts were greater than your total assets at the time of the sale.

I think this is what you wanted to know. If not, please let me know.
Thank you!
Customer: replied 3 years ago.

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.

Thank you

Expert:  cfortunato replied 3 years ago.

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.

 

 

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and other Bankruptcy Law Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
< Last | Next >
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
  • http://ww2.justanswer.com/uploads/TL/tleeders/2012-6-13_204815_TSL1.64x64.jpg Terry L.'s Avatar

    Terry L.

    Attorney

    Satisfied Customers:

    2204
    Better Business Bur 15yrs bankruptcy experience. Chicago Bar
  • http://ww2.justanswer.com/uploads/mnphillips2/2009-03-13_203105_10984459-249293407.jpeg Phillips Esq.'s Avatar

    Phillips Esq.

    Attorney-at-Law

    Satisfied Customers:

    950
    B.A.; M.B.A.; J.D.
  • http://ww2.justanswer.com/uploads/CO/cortrightlaw/2011-12-5_4117_Kevin.64x64.JPG cortrightlaw's Avatar

    cortrightlaw

    Attorney

    Satisfied Customers:

    490
    Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.
  • http://ww2.justanswer.com/uploads/Jay1968/2006-12-03_004423_JoeRossPhoto.jpg JoeLawyer's Avatar

    JoeLawyer

    Attorney

    Satisfied Customers:

    376
    Attorney in the practice of Bankruptcy Law since 1996
  • http://ww2.justanswer.com/uploads/DY/Dylatess/2012-9-11_1968_BHBTemplePhoto.64x64.jpg dylatess's Avatar

    dylatess

    Attorney

    Satisfied Customers:

    370
    35 plus years of experience specializing in bankruptcy law
  • http://ww2.justanswer.com/uploads/US/USLawAnswers/2012-9-20_23143_20090105211638Headshot3b.64x64.jpg Brent Blanchard's Avatar

    Brent Blanchard

    Bankruptcy Attorney

    Satisfied Customers:

    315
    Twelve years experience in all aspects of debtor & creditor BK.
 
 
 
Chat Now With A Bankruptcy Lawyer
cfortunato
cfortunato
3102 Satisfied Customers
Bankruptcy professor.