How can I file for bankruptcy if I have too much equity? 15 Answers as of July 25, 2011Hello, I was devastated to find out recently that I had too much equity in my house and rental property to file for bankruptcy, $170K and $70K. I thought my properties were upside down. If I file for chapter 13, I will have to pay all the 3rd party debt collectors expensive random fees which will probably amount to $1500. A month for 5 years approx. Currently, I'm paying $1800 a month to people who have judgments against me and there's two more coming down the pike. I will lose my company if this continues. I decided to wait for the value of my property to go down but I'm not sure I can. Is there any way out?
Benson Law Firm | David Benson
You should seek the counsel of a good bankruptcy attorney ASAP. You will probably have to file a 100% plan in Chapter 13, but all the interest and fees on your unsecured debt should cease and you may benefit from the order bankruptcy brings to your affairs.
Answer Applies to: Ohio
Law Offices of Daniel Moulton | Daniel Moulton
Chapter 13 will help you consolidate your bills and pay them back over a five year period with very little interest. Your monthly payment may be a great reduction over what you pay now. It may be in your best interest to file if you do not want to give up your properties.
Answer Applies to: Illinois
Cartwright Law Firm | Andrea Cartwight
Based upon the facts you have presented, it appears that you would not qualify to file a Chapter 7 without losing your assets/properties. However, a Chapter 13 would allow you to protect all of your assets and enter into a repayment plan with your creditors. When a bankruptcy is file, there is an "automatic stay" put in place which prohibits your creditors from proceeding against you. A Chapter 13 would also stop all interest from accuring on your credit card debts. The amount of your Chapter 13 Plan payment will depend upon several factors like your income and expenses, the amount of your unsecured debt, the equity you have in your property and the assets you are trying to keep. To reduce your Chapter 13 Plan payment, I would recommend that you obtain a professional appraisal of your properties. In most cases, the appraised value of your property would be much less than the state equalized value. While obtaining home appraisals can be expensive, it is the best indicator of the value of your home. You also indicated that a judgment has been entered against you so time is of the essence because after entry of the jusgment, the next step is the creditor may start garnishing your wages. A Chapter 13 will prevent this from occuring and also protect all of your property. A bankruptcy attorney can properly guide you through these difficult financial times.
Answer Applies to: Michigan
Carballo Law Offices | Tony E. Carballo
If you truly have $70,000 equity in a rental property then you can sell it and use the funds to settle your debts. Judgment creditors might accept less than the amount of their judgments if you offer lump sum amounts. (That might not be an option if the judgment creditors have already filed Abtracts of Judgment (liens) with the County Recorder's Office.) It does not make sense that you wait for the value of your property to go down (which might not happen) when you can use the equity in the rental property now take care of your debts. You should get appraisals before deciding what do and not rely on Zillow or similar online "estimates" of value.
Answer Applies to: California
Ashman Law Office | Glen Edward Ashman
Your first step is to sit down with counsel. If you actually have a lot of equity in real estate, a chapter 7 will cost you the real estate. A good lawyer will first evaluate your real estate numbers to see if you are right. Realistically, waiting probably costs you your properties. The judgments are liens on your realty that could also cost you the realty, and they may be removable in bankruptcy. If you wait for more judgments, your outcome worsens. Most experts say the real estate market has hit bottom. So waiting on a decline in home values in likely a poor strategy. While a 13 is tougher than a 7 to do, doing neither may be tougher than the 13.
Answer Applies to: Georgia
Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
It sounds like you are already pretty aware of your situation. Chapter 7 would mean seizure and liquidation of non-exempt property resulting from "exposed" equity. Chapter 13 dictates a minimum payment to unsecured creditors based on that equity, so the payment is what it is.
Answer Applies to: Indiana
Colorado Legal Solutions | Stephen Harkess
You could sell one of the properties and use the equity to pay expenses and debts and then reassess your situation. Alternatively, you could have the proeprty appraised to see if you really have as much equity as you think.
Answer Applies to: Colorado