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JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Hello, I have a situation where my 87 y.o. father has taken

Customer Question

Hello, I have a situation where my 87 y.o. father has taken a turn for the worst cognitively he was involved in a car wreck where the vehicle (6 months old at the time, loan from hyundai) was damaged and had no insurance on it, it has since been sitting in an impound lot for 6 months and all his bills have gone unpaid for that time. I have assumed care for him in washington state, he owns a home in nj that is paid for, all his credit cards and medical bills up to this point including the cost of the vehicle is in the 50-60 k range, his home was damaged in hurricane sandy and it too had no insurance, the home in decent condition is possibly worth 225k but would need at least 40k to get it sellable as there is mold damage throughout the first floor. I don't know what to do, the house is co-owned with his dead (since 1978) aunt and it lists here as an estate, he has no death certificate and she has no siblings
where do I start and what can I do? I am trying to care for him myself as long as possible and then put him into assisted living when that is no longer an option

thank you
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.
We can't provide legal advice on this website, only information. That being said, if your father were to file bankruptcy it would likely work to get rid of all of his debt, but he would lose the home in New Jersey since it is worth too much money to exempt (i.e. protect) pursuant to state and federal law, and he would likely lose the car since he would not have any money with which to get it out of impound. In other words, if he were to file bankruptcy, the bankruptcy trustee would take the home and sell it and apply the sale proceeds to his debt. Any funds left over after paying the debt and the trustee fees would come back to your father, but the trustee may or may not try to sell the home for as much as your father would get if he sold the home himself, so this may considerably decrease how much your father can walk away with as opposed to your father selling the home himself and then using the proceeds to settle his debts (for potentially much less than he owes).

So, a better option may be to contact a realtor in New Jersey to see about selling the home without making the improvements, and just sell it for less due to the problems with the house. Then, use the sale proceeds to settle the debts by contacting each creditor and offering a lower amount than he owes in return for making a single, lump sum payment. You can often settle debts for half or less than the current balance.

For example, if the home is worth $225k but needs $50k in repairs, see if it can be sold for $175k. Then, contact the creditors and try to settle for around 40%, which would leave him debt-free and still have maybe $125k or so left over.

Another option is for him to get a reverse mortgage on the home. Reverse mortgages are a government program where a private lender will give him a mortgage on the home that he never has to make a payment toward during his lifetime. Then when he passes away, the lender gets the home unless his heirs want to pay off the mortgage at that time. He can borrow up to 80% of the value of the home in a reverse mortgage. So, if the home is worth $175k in its current condition, and he could borrow around $130k or so (after fees, etc), then he could use the $130k to try to settle his $50-$60k in bills for around $30k or so, and still have $100k in the bank. Then when he passes away, the home will be taken by the bank and he will not owe the bank anything. There are some requirements to get a reverse mortgage, but he probably qualifies for most of them I can think of except that the home has to be his primary residence. If his primary residence is your home in Washington, then he probably can't get a reverse mortgage on a house in New Jersey. But, if he is simply staying with/visiting you under a temporary situation and the home in New Jersey is still his primary residence, then the reverse mortgage may work. He may need to get his deceased aunt's name off the deed before he can do a reverse mortgage, I'm not sure. Call this guy to ask about a reverse mortgage and see what the details are. I don't know if he can do a reverse mortgage for someone in Washington on a house in New Jersey, but if not, he can probably send you to someone who can. He is very knowledgeable so he can probably answer a lot of questions for you.

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