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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38877
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I have just received a complaint for $52,000 for a hospital

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I have just received a complaint for $52,000 for a hospital bill I owe. I cannot pay this bill, but could pay about $300 monthly. What is my next step

1. Do you own your home?

2. If #1 is "yes," then is your home's current fair market value worth more than the mortgage?

3. If #2, is "yes," then approximately how much more is the home worth than the loan?

4. Approximately, how much money do you have that is not held in an IRA or employer-sponsored retirement account?

Thanks in advance.
Customer: replied 3 years ago.

I have a home which is being rented out - no equity, but I am on my parents deed to their home.

Bankruptcy is probably not an option

Hmmm...this raises more questions. Please bear with me:

1. How do you hold title with your parents (tenants in common or joint tenants)?

2. If "tenants in common," what percentage or share of the property do you hold?

3. How much equity approximately is in your parent's property?

4. Did you pay anything to acquire title to your parent's property?

5. How long ago did you acquire title to your parent's property?

6. Are your parents in a position to sell their home and purchase another property without having your name on title?

Sorry for all the questions, but I can't help without having a good idea of the financial issues.

Thanks in advance.
Customer: replied 3 years ago.

joint tenants no payment for equity $200,000 about 2 years ago they cannot sell

Okay, thanks.

Under California Code Civ. Proc. 704.820, only the debtor's interest in a joint tenancy property may be sold to satisfy a money judgment. The federal bankruptcy courts have interpreted this to mean that the bankruptcy trustee is subject to the same control. See In re Reed, 940 F. 2d 1317 (1991).

Consequently, if you are a joint tenant with your parents in a home in which they reside, then the most that could be sold to cover your debt would be 1/3 of $200,000 in equity, or $60,000.

So, if you were to move into your parents' home, and declare it as your principal residence, then you would be protected for at least $75,000 in equity -- which means that the bankruptcy trustee could not sell the home.

Even if you did not move in, the bankruptcy court will not permit an interest in a person's home to be sold if it would be impractical to do so -- and case law suggests that where the sale operates to oust a nondebtor from a principal residence, then that is impractical, and the court will refuse to sell the property. See Reed, at 1332.

Consequently, I suggest that you may want to find a very competent bankruptcy attorney, and lay out all of your financial "cards on the table" -- because based upon what you have described, bankruptcy seems to be a very viable option for you.

Please let me know if my answer is helpful or if I can provide further clarification or assistance.

And, thanks for using!
Customer: replied 3 years ago.

what about the rental unit I own

If the rental property has no equity, then the bankruptcy trustee can't sell it, because it has no value. The trustee could assume the lease, if it's long term (more than one month/periodic). So, you could lose that income, to pay your unsecured creditors, until lease end. But, if the trustee were to do so, then he/she would also have to service the mortgage, pay the taxes, HOA fees, etc., which could make the rental value to the bankruptcy estate, of little or no value.

So, it's a question of whether or not the rental is worth anything to the bankruptcy trustee. That's something you would have to determine.

Hope this helps.
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