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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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We are under water on our home (about $32,000, plus a $21,000

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We are under water on our home (about $32,000, plus a $21,000 second mortgage) and have about $80,000 in credit card and other non secured loans. We want out of the home as there are only two of us and in our 60's. It would take about 5 plus years to break even on the home (we have put about $230,000 life savings into the home with down payment of $185,000 on a house we paid $920,000 5 and 1/2 years ago). I am a disability retired Oakland Police Officer getting $5,000 per month in non taxible retirement. I have a Private Investigation business where I clear about $65,000 per year after paying my sub-contractors, however, this income is set aside by the deductions, only having to pay about $5,000 per year in Soc Sec Self Emp tax. We thouht about asking Chase Bank to compromise and let us out of the loan and 2nd mortgage and allow us to keep our credit so we could buy a much cheaper home. Your Real Est attorney said that telling Chase we would quit making payments and let the home go into foreclosure and she felt the threat would not work. We are in Northern California. We have about $80,000 in an IRA and have about $25,000 in savings and mutual funds. Would we qualify for Chap 7 with the above info, if not, what about Chap 13, could they take the IRA funds and the savings. We have two cars, both paid for, a 2002 Mercedes worth about $8,000 and a 2006 Nissan worth about $18,000. Hope this is enough information? thanks, XXXXX XXXXX
Hi mlppi,
Is Social Security the source of the retirement income?
Were the 2 mortgages used to purchase the home, or is one or both a re-finance?
Customer: replied 6 years ago.
The retirement is private City of Oakland, CA disability (non-taxable). I am eligible for Soc Sec retirement (reduced under Windfall Elimination Provision) should I desire, my wife is receiving $680 per month Soc Sec benefits, as well as unemployement compensation of about $640. per month. The original 2005 RE Loan was a graduated payment 5 year adjustable loan, rolling over to the current adjustable 30 year loan, at this point at 2.45 percent rate. Purchased in 3/2005. The 2nd is an Equity Line of Credit (originally given for $100,000 in 3/2006, then reduced as time went on now down to $22,000), of which I owe $21,250. Also, I have a Small Business Loan from Bank of the West for $26,000 (that is part of the $80,000 debt I previously mentioned). The original loan info was: Date 3/31/2005, Price $920,000, paid 20 percent down ($185,000) and have made improvements of about $40,000 since. House is worth about $725,000 at this point. hope this helps, thanks, XXXXX XXXXX
I am trying to figure out your adjusted gross annual income, which is what will determine if you are eligible for a Chapter 7 Bankruptcy (the preferred one).
You said you clear $65,000 annually. Is this after all expenses except income taxes?
Customer: replied 6 years ago.
No, as I stated before, that is before deductions, I show no income after all deductions, I only pay Soc Security Self Employment taxes. I show no income after deductions. I have $1,250 per month deducted for Federal and State income tax from my retirement check and always have a refund at the end of the year.I hope that answers your questions? Thanks, Monte
According to the information you provided, you would qualify to file a Chapter 7 Bankruptcy (the preferred one, because you don't pay anything to creditors), because your total annual gross household non-social security income is less than $64,647.
The IRA funds are exempt, and you should be able to keep most of the savings account and the cars, because you will be allowed to apply a portion of the Homestead Exemption to these, since you are not using that exemption to keep your home.

Edited by Christina Fortunato, Esq. on 8/3/2010 at 11:49 AM EST
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Customer: replied 6 years ago.
Have been contemplating foreclosure on the home but may have to file bkrptcy later. Are you sure my $60,000 Oakland Police Disability pension (Tax Free Income) will not be counted by the court? Is there a specific section of the code that covers that? I am sure I will not make anywhere near the $64, 647 amount.


Yes, I am sure your police pension is exempt income. Here is the relevant portion of the applicable statute:


(10) The debtor's right to receive any of the following [is exempt]:

...(E) A payment under a stock bonus, pension, profit-sharing,
annuity, or similar plan or contract on account of illness,
disability, death, age, or length of service, to the extent
reasonably necessary for the support of the debtor and any dependent
of the debtor...


Here is the entire statute:



Customer: replied 6 years ago.
Great info, have more questions after more research, thanks, MB
You're welcome!
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