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How Do I Estimate the Value and Remaining Equity of My House


Gettinout
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If I may be facing bankruptcy how do I estimate the remaining equity in my house? I am attempting to negotiate debts, but don't want to cut into the allowable equity. It is possible that I may be sued by a former business partner, which would wipe me out. I live in California and the homestead allowance is $75,000. How is the value judged in a bankruptcy, and what would the allowable real estate fees be?

I figure it would be better to settle the CC debts up to the allowed equity before a potential lawsuit. This hopefully would prevent a lawsuit and help me get back on my feet.

At what point does a transaction become an illegal conveyance? I'd rather sleep at night than break laws.

Thanks for any input.

Gettinout

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Call a realtor and get a 'walk away' price on your home. Subtract the usual selling fees, commissions, etc., then subtract what you owe on it and the amounts of any liens besides the mortgage - and what's left is your equity.

Fraudulent conveyance - if you transfer any property in an attempt to keep it out of a creditors reach - or a Trustee - that is fraud. If you were 'bankruptcy planning' 3 years ago, the Trustee could cry 'fraud'. If you transfer property to an 'insider' for far less than the FMV, that is fraud - so you can't sell the property to your Uncle for $1000 ;)

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If I understand correctly, the act of negotiating debt and transferring to home equity would be a reasonable action in my situation. "I am simply trying to get out of debt" It obviously would indirectly affect the ability to pay future possible judgements. This would also have the effect of possibly deterring a lawsuit. I see it as a win win for me and possibly for the CC companies if they are smart.

As for dischargeable debt, if a major portion of the CC debt is business related it seems to me that transferring to the HELOC may also reduce my losses in a bankruptcy situation.

By strategizing my plan of action for debt am I not in some way opening the door for an illegal conveyance argument? No one has sued me or served me as of yet. I know of no immediate intentions of anyone to do so. There is always the possibility.

Thanks again for the input.

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As for dischargeable debt, if a major portion of the CC debt is business related it seems to me that transferring to the HELOC may also reduce my losses in a bankruptcy situation.

I've no idea what your're thinking. A HELOC is a secured debt. WHen you use the equity in your home to pay off unsecured creditors[credit cards} you've allowed someone a shot at your home.

How about laying out all of the facts? How much do you owe and your income plus, the amount of equity in your home.

Have you factored in the tax implications {if any} of receiving a 1099C on the unsettled portion of any debt?

You're not doing anything illegal by using a HELOC to pay off debts. You are doing something incredibility foolish {IMO}.

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Thank you for your response Bingo. I too have concerns about transferring to a secured debt. Wouldn't a company like MBNA be likely to go to court over $23K if I have significant equity above the exemptions allowed in bankruptcy?

If they were to get a judgement and lien can they force me to sell the house to pay the debt owed? Please remember I am in California and the laws seem more in the favor of the creditor.

I've purchased the ebooks on this site but have not finished reading nor come across the answer to the lien payment question. Any info or resources?

Thanks again Bingo for your frank answer.

Sincerely,

Gettinout

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Likely, they would sue if they believe they can get anything.

How much excess equity do you have? Here's a post from a fellow Califorian about how equity is figured:

http://www.debt-consolidation-credit-repair-service.com/phpBB2/viewtopic.php?t=27420&highlight=&sid=d5290a7beed7ca334246ee187dd3e5ac

--------------------------------------------------------------------------------

I spoke with a BK lawyer in L.A. Conservatively speaking a liquidation value of a home might go for 20% less than normal sale value. Then you subtract, again conservatively 6% for sale. But sale costs could be 9% when factoring real estate agent commission plus fees.

So in my case, my home on the high end could be worth 250K.

less 20% liquidation value: $200,000

Less 6% sales fees: 188,000

Less 75,000 California homestead exemption: 113,000.

MY loan on 1st mortgage: $115,000

HOUSE IS EXEMPT UNDER CHAPTER 7 !!!!!!!!!!!!!

Give us a few more details. As unpleasant as it may be, a Chapter 13 may be the way to go to perserve equity and payoff debt at less than 100%.

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Home Retail Value: $400K

minus 20% 80k

Fire sale Value $320K

minus 6% Fees 20k

Value after fees $300k

Minus Homestead 75k

Final Value $225k Value for BK

-------------------------------

First Mort. 181k

Second 51k

Total Current Liens $232K

Balance for BK ($7k) Yeahh Baby!

This does not include the unsecured debts.

I will consult consult with my CPA and or an attorney regarding these figures. Looks like I should stop worrying about losing my home. Obviously If I dont pay my creditors my credit will suffer, but I seem to be in a better place for negotiating.

Thanks again Bingo!

Do you have any info regarding the fact that the majority of the debt $23k on one card is business related? My accountant has advised me to treat it as unreimbursed employee expenses. I was a W-2 employee of a corp I owned a minority of shares in. Seems like these would be treated as personal debt. I imagine this is debateable.

I will do some research on the Walkaway valuation in my area. At one point homes were selling for more than the asking price in a few days. At this point the market has slowed and perhaps dropped slightly. I will post the results.

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I'd say talk with 2 or 3 bk lawyers. Most give free inital consultations and just get all of your options explained. I'm sure with exploding real estate prices in Ca. all bk lawyer have some experience with how local trustees handle this stuff.

Hopefully blacksurfer will weigh in with his experiiences.

Sorry, taxes are far beyond my paygrade. I have no idea.

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I'm not in CA, but an additional issue would be preference payments made within 60 days of the filing.......a preference is a payment to an unsecured creditor which allows them to realize a larger % payment than they would otherwise under a Ch 7 liquidation.

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I've set up an appointment with a BK Attorney this coming week. In speaking with the secretary on the phone I got the feeling that "THEIR" desired result would be for me to file Chapter 13. According to the person I spoke with there is no provision for a reduction in home value due to a distressed sale. This person did not even know the term. Obviously the Attorney, in theory, is the expert.

What questions do I need to ask to determine if the attorney is really representing me and my rights to a fair discharge of my debts. At this point if there really is no reduction in home value I would be more inclined to attempt to settle the debts and possibly use an existing HELOC to pay them off. Obviously this is a serious action in that I must remain current on the HELOC payments.

I understand the creditor can sue and get a judgement against me. Can they actually force me to sell my home to satisfy the judgement? If the creditor cannot force me to sell my home, I would demand a large reduction in exhange for cash payment.

I am in California. I will continue to report specifics I encounter, as I trudge forward.

Gettinout.

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You are on the right track by talking to a lawyer. Talk to a few more. If you have a good income and equity in your home, Chap 13 is not unreasonable.

I read through the earlier posts quickly, but have you considered selling your home to pay off MBNA and whatever else you have? You are worried about an old partner. What is that potential liability? Are you looking to use BK to avoid his claims?

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Yes I have considered selling the house. My feeling at this time is that if the HELOC were used to settle the debt and I fell behind at a later date I could then sell the house. The local market is very hot and a sale in 1-4 weeks is common at full price.

The possible concern with the former partner is complicated and most likely wouldn't be financially worthwhile for him to pursue. The dispute is over a business purchased through a corp in which I was a minor shareholder. No personal gaurantees were signed by myself and I resigned as an officer of the corp. If a suit were pursued it would be out of spite. This person, his family and the person the business was purchased from have the finances to plow me under with legal fees just for the satisfaction. I do imagine since their case is incredibly weak and the scrutiny they may experience could be great, they will not bother. They have vaguely threatened to come after me but at this time nothing has occured.

Would you happen to know the answer to whether or not a creditor can get a lien against my home, or force me to sell?

Would a bankrupty filing today protect me from the potential lawsuit 1-2 years from now?

Thanks for the input

I always seek professional counsel before acting on my own research.

Gettinout.

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A Judgment creditor can get a lien on your real property. I have never seen a creditor force-sell a residence. California may have laws that make that difficult, including personal exemption in the equity.

If you were to go BK, your lawyer might have you include any claim your erstwhile partners might have against you.

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I met with a second BK Attorney today. First Attorney seemed more concerned with protecting his good relationship with local Trustees than protecting my assets. Wouldn't discuss anything related to strategizing even when I stated I'd rather sleep at night as opposed to comitting fraud.

Todays Attorney helped me strategize (within the law) an approach to BK 7 or 13. I felt he was actually representing my interests. He did express concern that settling debts may not protect my assets if I am not able to get my income up in the near future. Certainly his push is for BK, but I did find his arguments to be sincere and realistic.

As for the Real Estate Valuation Issue: The Trustees are absolutely going to push for FULL FAIR MARKET VALUE. The local homes are in rare supply and selling within weeks for full price or more. No consideration is given for a distressed sale since there is no significant time involved in selling a home.

As for monthly payments in BK 13, the formula is appoximately $92 per month for every $10k in assets above the allowed exemptions.

For example:

Cars, $5k excess equity

Home $10k excess equity, after $75k Homestead for couples and liens.

Misc: $7k excess equity, or non exempt property.

Total Excess Equity $22k multiplied by.0092 equals a min. payment of $202.40 in BK 13. This is an illustration only. Adjust the figures to match your situation. I'm not sure if this is in addition to min. payments on the debts owed on unsecured accounts, or if it would be the total payment in a BK 13.

As for protection from previous business associates: If they are listed as potential creditors, who are possibly owed monies not yet requested (Lawsuit) they will have a time in which they will need to respond. After that they will have no claim outside of non dischargeable debts due to outright fraud.

I will be meeting with another BK Attorney who has a very aggressive reputation. I've been told that his fees are higher, and that you get what you pay for.

Hope this helps. I can use all the info anyone is willing to share.

In no way is any of this to be viewed as legal advice. This is only a sharing of my experiences and information received. Always seek Legal and or Finacial counsel to determine what is right for your situation.

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Thanks for sharing this info. In areas where real estate is still booming, that makes perfect sense. In my corner of paradise, the ave. lenght of time betwen listing and sale is 100 days and median prices are flat {year over year}. Location, location, location extends to bk as well.

The $200 figure would mean that's all unsecured creditors receive. Of course, you'd continye to pay for the secured debts.

I'm glad you're being aggressive in gettinglegal advice. Your situation wa a bit too complex for an interent message board.

Stay in touch!

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Thanks for the feedback Bingo. I must say I am greatly comforted that the potential lawsuit can be addressed in the BK process. At this point I am going to slow down, not worry about the credit card Boogey Man, and work my way through this. It is possible I may be able to get my income back up to deal with the debt. In the mean time the clock will be ticking on the SOL regarding the business issues.

One of the questions the Attorney asked was who is coming after you right now? I replied nobody. He said I thought so, the credit card companies are usually very slow and can be stalled easily for a year or more with legal help. This buys me time to potentially recover and sort out more of the business issues. This was perhaps the best info I have recieved yet. Perhaps a few more interviews with other BK Attorneys will also provide more comfort and confidence.

Thanks to everyone who shares on this board! Amazing info., amazing people, and the education no one esle can offer. What more could I ask for?

Gettinout

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