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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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my parents do not work anymore and only have socal security

Resolved Question:

my parents do not work anymore and only have socal security income of 2000.00/month..they have about 45k in credit card debt..they also have a condo in florida with about 40k equity if that. it is a rental that they only get four weeks out of the year with a mortgage of 440 dolllars a month with 600 dollars a month in dues..they are behind two months on that unit. our family house that are trying to sell or lease with option to buy has 50k equity in it for sure and that's if they sell a very reduced price.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 1 year ago.

cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy and Real Estate attorney here to assist you.

cfortunato :

What would you like to know?

Customer:

parents are on social security monthly. about 2000.00

cfortunato :

Thank you for your response.

cfortunato :

What would you like to know?

cfortunato :

Do you want to know if your parents can file a Bankruptcy?

Customer:

I wrote the question..before did you read it

Customer:

basically yes..

cfortunato :

Yes - given the facts you provided, your parents can file a Bankruptcy.

cfortunato :

If their combined income is $2,000 per month.

Customer:

45k in credit card debt..a mortgage in florida on a rental resort the is killing them..440 in mortgage and 600 in dues..they may have equity in that..yes it is combined

cfortunato :

It does not matter how much they owe. What matters is how much income they have.

Customer:

they are trying to sell it but there are 36 of them for sale

Customer:

then 2k combined

Customer:

income that is

cfortunato :

If they file a Bankruptcy, they can be relieved of the obligation to pay the mortgage for the condo.

Customer:

they are trying to sell there house in NC that does have equity for sure.

cfortunato :

But they will remain liable for any HOA or POA dues that accrue after the Bankruptcy is filed.

cfortunato :

What are they planning to do with the money they get from selling the NC home?

Customer:

can they divide that amongst the kids to protect that asset or what do you recommend as an option

cfortunato :

(Social Security income is not counted as income for determining whether someone can file a Bankruptcy, so it does not matter how much they receive from Social Security.)

cfortunato :

Won't they need the money to buy another home? If not, are they planning on renting?

Customer:

renting first..i want to buy them a home in florida eventually next year.

cfortunato :

How old are your parents?

Customer:

73 and 82

cfortunato :

The equity in their home is protected up to $60,000. If they sell their home, they will lose that protection.

cfortunato :

In other words, if they sell their home, their creditors can garnish the $50,000 equity they receive from the sale.

cfortunato :

If the money is given away, say to their children, their creditors can then take the money from their children.

cfortunato :

Unless they use the money from the sale to purchase another home.

cfortunato :

That is, unless your parents use the money from the sale to purchase another home.

Customer:

ok..is best to sell first and do something with the money then do the bankruptcy

cfortunato :

If they file a Bankruptcy first, there would not be a problem if they sold the house after the Bankruptcy is filed.

cfortunato :

If they sell first, the Bankruptcy court would be able to take the money from the sale - even if they give the money away.

Customer:

ok. if someone where to buy the house tomorrow and have some cash left and they stop the credit card and mortgage on the condo but keep up with HOA. what protection if any do they have?

cfortunato :

If your parents sell the house tomorrow, the only way to protect all of the money is to purchase another home.

cfortunato :

Cash is not protected.

Customer:

ok..almost there..if they sell now and even give the money to me for instance and two months later they file they can still come after me for that money

cfortunato :

Yes. However, as the Bankruptcy "lookback" period for this type of transfer is 2 years, the Bankruptcy court would not be able to take the money from you if your parents waited 2 years to file.

Customer:

ahhhh..ok..what if they transfer equity to me right now

cfortunato :

The applies to any asset that is transferred - whether the asset is property or money.

Customer:

ok..best to file now and equity is protected and when they sell after filing then the money is theirs to keep

cfortunato :

Yes - they can do anything they want with the property after a Bankruptcy is filed.

Customer:

hoa dues..once the bank takes over are they still liable for the dues

cfortunato :


If the bank takes the property, they will no longer be liable for the dues. However, since Social Security income is protected from collection efforts, if they do not pay the HOA dues there is nothing that can be done to them.

cfortunato :

In other words, the HOA cannot garnish or attach their Social Security money.

Customer:

which chapter should they do? should they become current with the florida mortgage to help with credit down the road.

cfortunato :

Chapter 7 is the most debtor-friendly Bankruptcy.

cfortunato :

Remaining current with the mortgage will not help their credit if they are going to file a Bankruptcy.

Customer:

you have been a great help..is there anything you can add?

cfortunato :

In fact, since they have already missed some payments, their credit has already taken a hit, which cannot be completely repaired by becoming current with the mortgage payments.

cfortunato :

One last thing:

Customer:

go ahead

cfortunato :

If all the money in their bank account(s) is from Social Security, creditors cannot garnish those bank accounts. However, if there is any money in those accounts that is not from Social Security, those accounts can be garnished, so it is usually a good idea to open a new account into which only Social Security is deposited.
Also, if all the money is from Social Security, they should inform the bank - in person and in writing so they have proof - that they should never allow their account(s) to be garnished because all the money is from Social Security. If they don't notify the bank, they will not know all the money is from Social Security (even if it is direct-deposited), and their account can be garnished.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 4 other Bankruptcy Law Specialists are ready to help you

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