What is the likeliness that the trustee will abandon the house and we can keep it in a Chapter 7? 15 Answers as of February 25, 2015

We are planning to file Chapter 7 as a married couple. We own a home worth approximately $156,700 according to tax records and the home does need quite a bit of work and we are in a neighborhood where houses sit empty for months. We owe $132,000 on the mortgage. We have 2 dependents so it is my understanding we only have $11,000 in exemptions for the house.

Ask a Local Attorney. 100% Anonymous. Free Answers.

Free Case Evaluation by a Local Lawyer: Click here
Ronald K. Nims LLC | Ronald K. Nims
Tax records generally value a house on the assumption that it's in good condition. The actual value of the house would be reduced by any repairs which are necessary to restore the house to good condition. So if the place needs a roof, paint and a new furnace, get quotes on the roof, painting and furnace replacement.. This will give you evidence to argue that the house is worth less than $157,600. Now look at it from the trustee's point of view: the trustee doesn't want your house; she wants money. So it's a $157,600 house, that requires (say) $10,000 in repairs and has a $132,000 loan - that only gives her $157,600 minus $142,000 minus your $11,000 exemption or $4,600. She's not a real estate company, to sell the house she's got to pay a realtor (or auction company) say 7% of the sales price - that's over $10,000. So she'd get nothing. The reality is that trustees take over two types of house: 1. Houses with no mortgage and no exemption - since the whole price goes to the trustee, she's willing to go through the hassle of selling a $25,000 house, if it's free and clear. 2. Houses that have large percentage of equity - so a $100,000 with a $30,000 loan and a $20,000 exemption means 50% of the house is equity - she'll take it. But with the same $50,000 of equity - a $1,000,000 house with a $930,000 loan and $20,000 of exempt, isn't going to be worth her while - the realtor commission is much more on the more expensive house and often people will only buy a bankruptcy house if there is a discount. A 5% discount on a $100,000 house is only $5,000 and the trustee still gets $45,000. But a 5% discount on a $1 million dollar house wipes out her entire gain. Now if there's a $1 million house with $500,000 of equity, don't try to talk to trustee for a while - she'll be having orgasms.
Answer Applies to: Ohio
Replied: 2/25/2015
Eranthe Law Firm
Eranthe Law Firm | Cate Eranthe
Look at California Code of Civil Procedure section 704.730. It will show you the amount of the homestead exemptions. Depending on the composition of your household it ranges from $75,000 to $175,000. Please go see a knowledgeable local bankruptcy attorney. This is a complex area of the law that can have a serious impact on your life. And yes if that was all you could protect a Chapter 7 Trustee would definitely go after it. They would go after a much smaller asset if it was not exempt.
Answer Applies to: California
Replied: 2/24/2015
A Fresh Start
A Fresh Start | Dorothy G Bunce
Then you don't live in Nevada, because the homestead exemption here is $550,000.
Answer Applies to: Nevada
Replied: 2/24/2015
The federal exemption for homestead real estate is about $22,000 per person and if a husband and wife own the home jointly it would be $44,000.? The state of Minnesota homestead exemption is about $375,000 but it is better to use the federal exemptions if possible.
Answer Applies to: Minnesota
Replied: 2/24/2015
Stephens Gourley & Bywater | David A. Stephens
I do not know what the likelihood is, but usually the trustee will allow you to purchase the balance of the equity beyond the exemption amount so you can keep the house. $11,000 is a very low exemption amount.
Answer Applies to: Nevada
Replied: 2/24/2015
    The Law Offices of Ryan F. Beach, PLLC
    The Law Offices of Ryan F. Beach, PLLC | Ryan Beach
    When evaluating the probability that an asset will be liquidated in a Chapter 7, a full review of a debtor's assets is necessary. This is especially true when looking at a debtor's home. Under the federal exemptions, a debtor may exempt equity in a home in the amount of $22,975 by using the 11 USC 522(d)(1) "homestead exemption." When it is a joint case (husband and wife filing together), the homestead exemption may be used by both debtors, which would allow for an exemption of $45,950.00. A debtor's ability to use the homestead exemption is reduced when other assets require exemption under the 11 USC 522(d)(5) "wild card" exemption. If the wild card exemption is needed to protect assets of a debtor and the equity in those assets exceed $1,225.00, the debtor will need to borrow from the homestead exemption (up to $11,500.00 can be borrowed by each debtor). The wild card exemption is typically used for bank account funds, anticipated tax refunds, stocks or investments outside of an qualified retirement plan, or for assets that have value that exceeds its applicable statutory exemption. A debtor is not required to use the federal exemptions. A debtor may elect to use the Michigan exemptions, which provide for a more generous homestead exemption. However, most debtors do not elect to use the Michigan exemptions because there is no equivalent to the federal wild card exemption. A consultation with an experienced bankruptcy attorney would be able to give you a better sense of what it means to elect state exemptions and if it is right for you. The Trustee when determining whether he/she will administer or attempt to liquidate an asset will first try to determine what equity exists (market value less any liens). Once the equity is determined or estimated, the Trustee would then look at the exemptions taken and see to what extent any of the equity is unprotected. A Trustee will not liquidate a home unless he/she thinks they can sell it for enough to pay off all the valid liens, pay off the debtor for any valid exemptions, pay all necessary costs associated with a sale, and also have some type of profit after the aforementioned are satisfied. A note of caution: when filing a Chapter 7, the Trustee will be examining the recorded deed and recorded mortgage(s) to see if there are any defects that would allow them to avoid the lien. Avoiding the lien is a fast way to create a large amount of equity and cause a debtor to lose their home. This is one, among many, reasons that it is so important to hire an experienced and thorough bankruptcy attorney. Sitting down with an experienced bankruptcy attorney to discuss your assets in detail should provide you with a better sense of whether liquidation is likely for you. An attorney will also be able to discuss your alternatives for resolving your debt while avoiding loss of assets, such as Chapter 13 and debt settlement.
    Answer Applies to: Michigan
    Replied: 2/24/2015
    Idaho Bankruptcy Law | Paul Ross
    Idaho has $100,000 in exemptions for the home, so you would be safe here. I cannot speak for other jurisdictions.
    Answer Applies to: Idaho
    Replied: 2/24/2015
    GARCIA & GONZALES, P.C. | Richard N. Gonzales
    In Colorado you would be fine. You are entitled to a $60,000 homestead exemption. That amount increases to $90,000 if either one of you are 60 or older, or either one of you are handicapped, or anyone of your children are handicapped. I hope this helps. Good luck!
    Answer Applies to: Colorado
    Replied: 2/24/2015
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    I have no idea what state you are in. See a lawyer. Exemptions are different everywhere. And often the tax records are inaccurate as to true value. You may find a lawyer at nacba.com.
    Answer Applies to: California
    Replied: 2/24/2015
    Garner Law Office
    Garner Law Office | Daniel Garner
    The homestead exemption is usually based on the amount of equity you have in your home. Your stated facts suggest that you have close to $25,000 in equity. County tax records are a credible source of value but you can also ask a realtor for a comparative market analysis (CMA) if there are reasons you believe the value is different from the tax records. Some states, such as Oregon, give debtors a choice of state or federal exemptions, and this amount of equity would be exempt under Oregon or federal laws, providing that you can use those exemptions by virtue of satisfying the residency requirements. Regardless, only a lawyer fully informed of your situation can advise you on the appropriate exemptions to use. That is the essence of the practice of law.
    Answer Applies to: Oregon
    Replied: 2/24/2015
    Goldsmith & Guymon
    Goldsmith & Guymon | Marjorie Guymon
    The entire equity in the house is exempt if it is your homestead. If you live there it is your homestead. The homestead exemption can cover up to $550,000 equity.
    Answer Applies to: Nevada
    Replied: 2/24/2015
    Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
    If you live in Wisconsin, and are married, you may exempt up to $150,000.00 of your equity in the home. So you should have nothing to be concerned about. Even if you chose the federal, rather than the Wisconsin, exemptions, you could ordinarily exempt something more than $44,000 in equity. I have no idea how the number of dependents you have relates to the size of your homestead exemption: it doesn't. I do strongly suggest you retain a skilled bankruptcy lawyer to assist you through this process. It's almost always worth the expense. Good Luck.
    Answer Applies to: Wisconsin
    Replied: 2/24/2015
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    Depends what county you are in but if you Google the "homestead exemption" for your county, it may be up to $300,000 for the two of you if you are both on the deed.
    Answer Applies to: New York
    Replied: 2/24/2015
    J.M. Cook, P.A. | J.M. Cook
    You have calculated your exemptions wrong. You and your spouse each would have $35,000 equity in your principal residence. You should really consult with a qualified bankruptcy attorney before proceeding. This is not an area of the law that you can pick up online or with a forms book from Office Depot.
    Answer Applies to: North Carolina
    Replied: 2/24/2015
    John W. Lee, PC
    John W. Lee, PC | Kim A. Lewis
    You should get an appraisal or at least a CMA before filing to confirm the value of the home.
    Answer Applies to: Virginia
    Replied: 2/24/2015
Click to View More Answers:
12 3 Free Legal QuestionsConnect with a local attorney