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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I am going through foreclosure. I tried to work with the bank

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I am going through foreclosure. I tried to work with the bank to get a short sale but was unsuccessful. I live in Wyoming where banks have up to 10 years to pursue a deficiency judgement. I do not want to live for the next 10 years with this shadow over my head and am considering filing bankruptcy.

I was recently married and my husband and my combined incomes is too high to pass the means test in order to qualify for Chapter 7.. I do have some outstanding credit card debt but no car loan or other loans.

If I personally file for Chapter 13, and pay off the credit card debt, will this also cancel the possibility of a future deficiency judgement?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

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

Yes - either a Chapter 7 or a Chapter 13 Bankruptcy can discharge your liability for the balance of the mortgage after the house sells in a foreclosure sale.

If the lender has already gotten a deficiency judgment when you file a Bankruptcy, the Bankrutpcy will discharge the judgment. If the lender has not already gotten a deficiency judgment at the time you file a Bankruptcy, that will prevent the lender from getting a judgment.

 

I think this is what you wanted to know. If not, please let me know.
Thank you.
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Customer: replied 5 years ago.
Dear XXXXX,

I originally bought the property as a primary residence but moved out and began to rent it 3 years ago. I then recently got married and my husband's income is slightly too high to pass the means test for Chapter 7. If I rented the property and declared it on Schedule E of my income taxes, would this mean that the foreclosed property could be considered business debt and thus I would not be required to pass the means test? I am referencing the following: http://www.nolo.com/legal-encyclopedia/business-debt-exception-chapter-7-bankruptcy-means-test.html .

It was not purchased as a rental property but has been used as such since 2009.

Thank you,
Mary Lynn
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

When determining whether a debt is a consumer or a business debt, what matters is what the obligation was originally obtained for. Bankruptcy Stat. 101(8).

If the mortgage for your rental property was used to purchase a home for you to live in, that mortgage is still consumer debt, even though the property is now a business property, and currently being used to earn income.

 

I think this is what you wanted to know. If not, please let me know.
Thank you.
cfortunato and other Bankruptcy Law Specialists are ready to help you

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