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Maverick
Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 3431
Experience:  Bankruptcy Law With An Accounting Degree - 13 + years as civil lawyer
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Currently I cannot file chapter 13 because my unsecured debts

Customer Question

Currently I cannot file chapter 13 because my unsecured debts are over the allowed limit, mostly because my house is under water ($400K). Because I have a small business and cannot file chapter 7. I do not want to keep the house.

My question is, once the house is foreclosed, do my mortgage debts still be counted as unsecured debts thus prevent me from filing chapter13?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Maverick replied 3 years ago.

Welcome to Just Answer! My name is XXXXXXXX. X very much enjoy what I do and I hope that you will benefit from this information.

 

The debt associated with your mortgage is a secured debt not an unsecured debt.

 

Secured debt limit: $1,081,400 You can qualify for Chapter 13 bankruptcy only if your secured debt does not exceed $1,081,400. This means that all secured debts (including loans for houses, cars, or anything else tied to property) must total less than that amount.

 

Unsecured debt limit: $360,475 Additionally, filers can have up to $360,475 in unsecured debts. This means that credit card debt, payday loans, medical bills and other debt not tied to any property must not exceed that amount.

 

 

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Customer: replied 3 years ago.

I need to know from you the followings:

  1. If I file chapter 7 can I still run my business. This small business is an LLC?
  2. my mortgage total $800K, current market value is around $400K;
  3. Total unsecured debts: $500K (100K from credit card and $400K from the under water portion)

Will I be able to file chapter 13 if I let my deeply under water house foreclosed. In other words, after foreclosure of the house, will the $400K unsecured debt from house still count against the total debts and therefore I will not be able to file chapter 13?

What are other option beside chapter 11? Thanks

Expert:  Maverick replied 3 years ago.

1. In a chapter 7 the BK trustee will hold the rights to your interest in the LLC. If those rights are worth something, he may sell them for the benefit of the creditors.

 

2. The full 800k of your mortgage is a SECURED debt not an unsecured debt. It does not matter that the current value of the house is 400k. It was a secured debt by virtue of the fact that the home was pledged as collateral for the home loan. So, you should be able to file a chapter 13 because your unsecured debt amount is only 100k.

 

3. The above should have answered all your questions. If not, please write back.

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