Bankruptcy Law

Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.

Ask a Lawyer,
Get an Answer ASAP!

Bankruptcy Law
This answer was rated:

I own three (real estate) properties in Florida, one of which

used to be my personal...
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?
Show More
Show Less
Ask Your Own Bankruptcy Law Question
Answered in 44 minutes by:
8/2/2013
cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8,023
Experience: Bankruptcy professor.
Verified

cfortunato :

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

cfortunato :

Is it clear that what you currently owe for your two investment properties is more than what you owe for the property that was your residence, in addition to the total of your other personal debt?

cfortunato :

In other words, is it clear that the debt your incurred for business purposes is greater than the debt you incurred for personal purposes (including your prior residence)?

Customer:

Yes, the total business related debt is $823,067. The total debt on our personal residence and other minor consumer debts is $739,889.

Customer:

By the way, since we no longer live in our former residence, and the county has withdrawn or homestead exemption, can we include it as a business debt since it is now technically available to be rented?

cfortunato :

Thank you for your response.


Because your business debts clearly exceed your personal debts, you do not have to worry about filing a Chapter 7, even though you do not pass the Means Test - because of your income. This is because Chapter 7 filers with business debts greater than personal debts do not have to pass the Means Test.


 

cfortunato :

And yes, if there was a problem with passing the Means Test (which would not be the case with you), a Bankruptcy filer would be allowed to convert the case to a Chapter 13.

cfortunato :

The amount owed for your former residence would not be considered to be business debt - even though you are no longer living there, and even if you rented out the home,

cfortunato :

because the Bankruptcy court looks at what the debt was incurred for at time the debt was incurred - not at the time the Bankruptcy was filed.

Customer: Ok, Chris that was very helpful. My last clarification is: so even though our old residence is personal debt, the negative equity and potential deficiency judgment will be eliminated in the Chapter 7, right?
cfortunato :

Yes - even though your debt is primarily business debt, your personal Bankruptcy will discharge both your business debts and your personal debts - including the balance of what is owed for your former residence.

cfortunato :

If your Bankruptcy is filed before the lender gets a deficiency judgment, the Bankruptcy will prevent the lender from getting a deficiency judgment.

cfortunato :

If your Bankruptcy is filed after the lender gets a deficiency judgment, the Bankruptcy will discharge the judgment.

cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8,023
Experience: Bankruptcy professor.
Verified
cfortunato and 87 other Bankruptcy Law Specialists are ready to help you
Ask your own question now

Yes - even though your debt is primarily business debt, your personal Chapter 7 Bankruptcy will discharge both your business debts and your personal debts - including the balance of what is owed for your former residence.
If your Bankruptcy is filed before the lender gets a deficiency judgment, the Bankruptcy will prevent the lender from getting a deficiency judgment.

If your Bankruptcy is filed after the lender gets a deficiency judgment, the Bankruptcy will discharge the judgment.

Ask Your Own Bankruptcy Law Question
Ask cfortunato Your Own Question
cfortunato
cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8,023
8,023 Satisfied Customers
Experience: Bankruptcy professor.

cfortunato is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Terry L.

Terry L.

Attorney

2,679 satisfied customers

Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.

cortrightlaw

cortrightlaw

Attorney

511 satisfied customers

Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

JoeLawyer

JoeLawyer

Attorney

376 satisfied customers

Attorney in the practice of Bankruptcy Law since 1996

A.J.

A.J.

Attorney

262 satisfied customers

Experienced consumer bankruptcy attorney.

Fritz

Fritz

Attorney

209 satisfied customers

Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases

Law Girl

Law Girl

Attorney

153 satisfied customers

I am an attorney.

Paul K, Esq.

Paul K, Esq.

Attorney

141 satisfied customers

10 years Exp., Great customer service, Prompt responses.

< Previous | Next >

Related Bankruptcy Law Questions
I have the same question. I had a Chapter 7 bankruptcy 13
I have the same question. I had a Chapter 7 bankruptcy 13 years ago. I have not seen on my credit report for the last 6 years. The SBA question says have you ever had a bankruptcy? Is it fair to say n… read more
INFOLAWYER
INFOLAWYER
Partner
Doctoral Degree
56,303 satisfied customers
I am probably going to need to file a Chapter 7 bankruptcy
I am probably going to need to file a Chapter 7 bankruptcy in Minnesota because Geico is suing me for $100K for personal injures sustained by someone else that was involved in an accident. I am fighti… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
I have a chapter 7 in process in las vegas, nv. I have a
I have a chapter 7 in process in las vegas, nv. I have a court date set for a reaffirmation agreement for my mortgage. I would like to change my court date to a more current date. What motion with the… read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,377 satisfied customers
I filled chapter 7 and discharged a mortgage with Wells
I filled chapter 7 and discharged a mortgage with Wells Fargo in 2009. I did not reaffirm the mortgage but I continued making payments for these eight years. I requested a payoff from Wells Fargo and … read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
I am considering filing a chapter 7 personal bankruptcy. I
I am considering filing a chapter 7 personal bankruptcy. I know some years ago there were some changes in the bankruptcy laws. What I need to know, first of all, is how much money can be retained in a… read more
LegalGems
LegalGems
Juris Doctorate
10,718 satisfied customers
Interested in information concerning personal chapter 7
interested in information concerning personal chapter 7 bankruptcy as a member of a 50/50 LLC … read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
Regarding my chapter 7 ProSe on the Reaffirmation $2000
Regarding my chapter 7 ProSe on the Reaffirmation $2000 behind on payments, $6000 equity in car Obviously, we don't want to be Repo'd with all that equity.My husband went to the reaff hearing today an… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,679 satisfied customers
Regarding my chapter 7 Reaffirmation hearing tomorrow,
Regarding my chapter 7 Reaffirmation hearing tomorrow, husband is going without me. $2000 behind on payments, 6000 equity in car. When I try to talk to the people at "ascension capital" who do Cap1's … read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,377 satisfied customers
We filed chapter 7 bankruptcy in California with the intent
We filed chapter 7 bankruptcy in California with the intent on reaffirming the car.We are 90 days out with a report of no distribution and "awaiting discharge" on Pacer.We have $6000 equity in the car… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
BANKRUPTCY: A debtor wants to file a personal Chapter 7
BANKRUPTCY: A debtor wants to file a personal Chapter 7 bankruptcy and owns a small business. They are filing mostly consumer debts. Can the Debtor continue to run their small business and generate in… read more
LegalGems
LegalGems
Juris Doctorate
10,718 satisfied customers
My questions center around Chapter 7 bankruptcy. We have
My questions center around Chapter 7 bankruptcy. We have consulted with local attorneys, and want to verify the information we have received. We live in California, and have a household of 3 people (m… read more
socrateaser
socrateaser
1,031 satisfied customers
If you file a chapter 7 bankruptcy and I own a house free
If you file a chapter 7 bankruptcy and I own a house free and clear that's worth 15000 can I keep the house? if so do I have to claim it as an exemption… read more
LegalGems
LegalGems
Juris Doctorate
10,718 satisfied customers
This is a Chapter 7 question. The Debtor was unemployed for
This is a Chapter 7 question. The Debtor was unemployed for 4 of the last 6 months, having worked the last 2 months. Her currently monthly income amount is above the local median, but averaged over th… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,679 satisfied customers
My parents filed chapter 7 bankruptcy. They received a
My parents filed chapter 7 bankruptcy. They received a letter back from the attorney they hired and the letter stated, "they are over the limit on the allowable exemptions for a chapter 7".What does t… read more
Ray
Ray
Lawyer
Doctoral Degree
30,888 satisfied customers
I filed personal bankruptcy chapter 7 in 2011 and chapter 13
I filed personal bankruptcy chapter 7 in 2011 and chapter 13 in 2012. I receive a discharge for chapter 7 in 2012 and paid off my chapter 13 obligation in 2016. I did not not receive a discharge in th… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
Files his Chapter 7 petition and fails to include a creditor
John files his Chapter 7 petition and fails to include a creditor whom he borrowed $5K from for an educational loan. He wants to amend his petition to include the creditor before his creditors meeting… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,679 satisfied customers
After a Chapter 7 Bankruptcy, an Equity loan was reaffirmed,
After a Chapter 7 Bankruptcy, an Equity loan was reaffirmed, but only by the husband. The wife never signed. Does this mean that the loan company now has lost consent? In her not reaffirming the loan … read more
PaulmoJD
PaulmoJD
Attorney At Law
Doctoral Degree
106 satisfied customers
Personal Bankruptcy Chapter 7 in Florida, owner of a
Personal Bankruptcy Chapter 7 in Florida, owner of a one-person S-Corp services business. In filing Ch 7 (Personal) BK I understand I will relinquish all non-exempt personal assets. Question is on S-C… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x