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Home Equity and Chapter 11 Bankruptcy

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  • 04-12-2018, 08:39 AM
    83seasons
    Home Equity and Chapter 11 Bankruptcy
    My question involves bankruptcy in the state of: MARYLAND

    Hi,

    My mom filed Chapter 7 and the trustee is now having her house appraised to see if they can sell it to pay off her debts. She's afraid that she will end up losing the home. She doesn't have facts (they just appraised the house yesterday), but I'm guessing that the equity is more than enough to cover the debts. If the bankruptcy has just been filed, can she do anything to save her house?

    Here are my questions:
    1. If they sell the house, how long can she live there until she has to leave?

    2. Once the house is sold, will she get the $23K in MD Homestead exemption? She does live there, is current on her mortgage payments and is the single home owner.

    3. Her debt is small-- around $28K - $35K-- and my guess is the equity could be around $90-$100K. She has terrible credit so obviously she couldn't access that equity to prevent bankruptcy.
    After she gets the $23K from MD Homestead exemption and the creditors are paid, it could about $22-$42K left from the sale, what happens to the rest of that money?

    3. Is there ANY WAY to stop this from happening? Can she convert it to Chapter 11,13? Can she do anything legally to keep her home?

    My mom is super uneducated about this process and did this without an attorney. She's in her mid 60's and I am scared for her so anything you can tell me would help or point me in the right direction.

    Thanks!
  • 04-12-2018, 08:44 AM
    Mr. Knowitall
    Re: Bankruptcy
    If your mother has sufficient non-exempt equity in her home to pay off her debts, then she should consider alternatives to bankruptcy -- such as refinancing her home and using that equity to pay off her debts. Given that she is attempting to file for bankruptcy, it seems very possible that she would need a cosigner in order to refinance.

    We are not in a position to comment on how much equity she may have in the home, but if you are correct then she has ample equity above and beyond her exemptions that could be applied to her debts.

    If she wants she can discharge her bankruptcy case now, or she can wait to see what the appraised value is and make her decision once she knows that information.

    In a Chapter 13 bankruptcy, she would restructure her debts -- so that may be a viable option for her, although similar issues apply. She may end up repaying 100% of her debts over the course of the repayment plan, with the primary benefit being that her monthly payments may be lower during the course of the repayment plan.

    Mom really should discuss her situation with a bankruptcy lawyer, and really should have done so before filing.
  • 04-12-2018, 10:20 AM
    despritfreya
    Re: Bankruptcy
    Is this the same poster as in this thread?:

    https://www.expertlaw.com/forums/sho...d.php?t=228165

    If not, the above thread may help.

    Des.
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