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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38910
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I have a lot of credit card debt and I have lost most of my

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I have a lot of credit card debt and I have lost most of my income. I moved to Colorado from California. I rented my home in California. I am not currently late on any of my debt, but I will become delinquent this month.

My home is current as well.

If I file Chapter 13 will I be made to sell my home in California particularly since I rent it out?
If I lived in my home would I be forced to sell it to get the equity out to pay off my debt.

In Chapter 13, your creditors are entitled to at least as much as they would receive in a Chapter 7 asset liquidation. Consequently, if your debt is large enough so that you cannot pay all of it off during the course of your Chapter 13 plan, then the bankruptcy trustee can sell the property in order to pay your unsecured creditors on the remaining debt obligation. Were you living in the property, you would be able to exempt between $75,000-$175,000 in equity (see Cal. Code Civ. Proc. 703.730 -- scroll down). But, as you have rented the property, you cannot meet the residency requirement for the exemption, and consequently any equity in the property is "up for grabs" to pay your creditors.

If you are really at the "end of your rope," then you may want to consider selling the property and trying to find someplace that you can buy for cash in Colorado. That way you can use the homestead exemption. Note that if you have lived in Colorado for more than 730 days, then you will have to use the Colorado homestead exemption which is $60,000 ($120,000 if married). So, dependent upon your total circumstances, there may be no advantage to selling the property in California. You may be better off trying to create a 100% Chapter 13 plan, and use the bankruptcy to pay off your debts over time without being hassled any further.

You have some difficult choices to make here. Please let me know if my answer is helpful or if you need further assistance.
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

Thank you.


What is a 100% Chapter 13 plan?

It's a plan where you use the bankruptcy court to protect you from continued harassment by your creditors while you pay them in full over the course of the plan. Dependent upon your income (i.e., below or above the state median average), the Chapter 13 plan is either 3 or 5 years in length.

Hope this helps.