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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I currently have over $100,000 in unsecured debt between my

Resolved Question:

I currently have over $100,000 in unsecured debt between my wife and I and a secured second mortgage on my home. I am retiring from the military in less than 90 days and will take a 50% pay cut and am considering filing bankruptcy (chapter 7). Are there any advantages/disadvantages between filing in Arizona versus California?
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 6 years ago.
Hi JACustomer,
Although there are some differences, the exemptions for both states are similar. However, if you do not have to use the Homestead Exemption - because you have little or no equity in your home - California allows you to exempt (protect) up to $20,725 of any other property instead. You cannot do this with the Arizona exemptions.
But you have to live in one state continuously for at least 2 years before you can use that state's exemptions.

I think this is what you wanted to know. If not, please let me know.
Thank you!
Customer: replied 6 years ago.
I have a negative value on my home of $120000. My primary concern is qualifying for chapter 7 under current law with a take-home pay of $4500 per month. Does chapter 7 allow for liquidation of a secured loan like a second mortgage?
Expert:  cfortunato replied 6 years ago.
1) Whether or not you can file a Chapter 7 depends on your gross monthly household income, not your take-home income. What is your current gross monthly household income?
2) What is the balance of the first mortgage? What is the balance of the second mortgage?
3) What is the current market value of your home?
Customer: replied 6 years ago.
1) My gross monthly is approximately $6000 for a family of four (military also)
2) the first has a balance of $190,000 and the second a balance of $45,000
3) the current home value is less than $150,000.

I am a military member stationed in California and the property is in Arizona. The service members civil relief act is not available to me.

Do you think it more logical to file chapter 7 to rid myself of the unsecured debt and therefore have funds available to pay the second?

Expert:  cfortunato replied 6 years ago.
1) If you are stationed in California but have a home in Arizona, does that mean your primary residence is in Arizona?
2) How long have you been stationed in California?
Customer: replied 6 years ago.
1) My home in Arizona is my primary residence and I rent an apartment in California.
2) I have been stationed in California since August 2009
Expert:  cfortunato replied 6 years ago.
Given the information you provided, you can file a Bankruptcy in California or Arizona, but you must use the Arizona exemptions - regardless of where you file - since that is where your primary residence has been for the past two years.
To pass the Means Test - which allows you to file a Chapter 7 - the gross monthly income for a family of 4 in California must be less than $6,572. For Arizona the amount is $5,593. This means you can currently file a Chapter 7 in California, but not in Arizona. However, if you wait until you retire, you can file in Arizona.
Chapter 7 does not allow you to liquidate a second mortgage, or to remove the second mortgage lien. However, this can be done by filing a Chapter 13, where you have to pay all disposable income to the Bankruptcy court for 3 years. At the end of the 3 years, the balance of the second mortgage - and the lien - can be discharged.
(Disposable income is your gross income minus allowable expenses.)
From the information you provided, it looks like filing a Chapter 13 is a good option.
cfortunato and other Bankruptcy Law Specialists are ready to help you