I own three (real estate) properties in Florida, one of which used to be my personal residence. I accepted an offer of employment in New York and relocated there a year ago in July 2012. All three of the properties are in foreclosure and due to the dramatic drop in market value and accumulated interest and fees, the estimated total value of the properties is only $563,292, but my total indebtedness is $1,502,507.
Furthermore, my former main residence (no longer a homestead) has a second mortgage (HELOC) with a principal balance of $182K, and the bank sued my wife and I on the note outside of the foreclosure and so we now also have a $254K judgment. This judgment has prevented us from selling the house through a short sale- even though we had a well-qualified buyer and a sale price that covered the principal of the first mortgage lender.
All things considered, my wife and I have considered many different ways to "sell our way out" of the situation by liquidating the properties through short sales, but when we consider the possibility of future deficiency judgments and the fact that we cannot even sell one of the houses without first settling a $254K judgment - chapter 7
seems like the cleanest and most effective way for us to go. We have no car loans, and no active credit card accounts - just another judgment for an old credit card account of $12K and an old business collection account for $46K.
We consulted with a local bankruptcy attorney, and he prepared a petition
, but he is concerned that the trustee
will balk at granting us a chapter 7 because of my high income. He advises that we do not pass the "means test
" and recommends that we submit a Chapter 7 for business by considering all of our properties as investment properties. However, the attorney seems concerned that our income might disqualify us for a chapter 7 and seems hesitant to submit our petition - my sense is that he has never quite seen a case like ours (high-income, little or no typical consumer debt, etc.) and this makes us a bit nervous.
So, my question is: based on our current level of real estate "negative equity
" (over $1 million) does our attorney's concern seem justifiable or unfounded if we submit a Chapter 7 petition as a business?
Also, would we be able to do chapter 13 as a fallback? If so, would it eliminate any deficiency judgments and the summary final judgment granted the second mortgage holder?