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  1. #1
    Join Date
    Jun 2008
    Posts
    15

    Default What Happens to a Second Home in Chapter 13 Bankruptcy

    My question involves bankruptcy in the state of: WA

    I just bought a 2nd home, which is now my primary, my first home is for sale however the sale did go as fast as we'd hoped.

    Question,
    Can I loose my new home which is cheaper than the old one and where I currently live if I file Chapter 13? I am scared to death that I will loose the new house where we live. My wife's Asthma was killing here on top of the mountain in the snow but she's better in the new home where it's not dry and cold.

    Help!!

  2. #2
    Join Date
    Jun 2008
    Posts
    15

    Default Re: What Happens to a Second Home in Chapter 13 Bankruptcy

    Folks,

    Allow me to clarify my question and statement, I see a major typo here.

    I just bought a 2nd home, which is now my primary, my first home is for sale however the sale did go as fast as we'd hoped.

    Should read

    I recently purchased a 2nd home which is now my primary residence. My first home is for sale, however the sale did not progress as fast as expected as we live in a ski resort town. The homes under $500k are moving here and ours is priced at $425k.

    My question is am I likely to lose both homes to the courts?

  3. #3
    Join Date
    Sep 2005
    Location
    Behind a Desk
    Posts
    98,846

    Default Re: What Happens to a Second Home in Chapter 13 Bankruptcy

    I urge you to consult a bankruptcy lawyer.

    It may be possible to "cram down" the mortgage on your original home, if it can now be characterized as a second home or investment property, such that your mortgage balance is reduced to its market value. But I would expect your lender to try to fight that based upon your representations when you purchased that it would be a primary residence and your historic use of the home.

    You may also want to discuss your options with your mortgage lender, as it may be possible to get them to agree to a short sale (where you sell for less than the balance of your mortgage) in order to avoid default or foreclosure.

  4. #4
    Join Date
    Jun 2008
    Posts
    15

    Default Re: What Happens to a Second Home in Chapter 13 Bankruptcy

    Quote Quoting Mr. Knowitall
    View Post
    I urge you to consult a bankruptcy lawyer.

    It may be possible to "cram down" the mortgage on your original home, if it can now be characterized as a second home or investment property, such that your mortgage balance is reduced to its market value. But I would expect your lender to try to fight that based upon your representations when you purchased that it would be a primary residence and your historic use of the home.

    You may also want to discuss your options with your mortgage lender, as it may be possible to get them to agree to a short sale (where you sell for less than the balance of your mortgage) in order to avoid default or foreclosure.
    I appreciate your thoughts. I may not have clarified this enough to answer my question.

    We lived in our first home for 2+ years as required by our financing and have never rented it out or anything of the nature. It now sits empty in a ski resort town waiting for a buyer. Homes are selling up there however slower than anticipated.

    We purchased the 2nd home based on the sales history in our original community expecting a quicker sale. My wife has severe asthma which is why we had to move, the cold dry air of the winter and dusty summers are killing her quite literally. So we bought our 2nd home believing our first home would sell faster.

    My question is this. Do I stand to lose both homes to the courts? If we file we would file Chapter 13 with the hopes of keeping the new home which is in the best interest of my wife's health. We are still trying to sell the first home which would pay off 100% of our debt if it sold for even 30k below the asking price.

  5. #5
    Join Date
    Mar 2009
    Location
    Key West, FL
    Posts
    2,350

    Default Re: What Happens to a Second Home in Chapter 13 Bankruptcy

    You must talk to a bankruptcy attorney.

    In Florida and a few states your primary residence cannot be taken. One indication is where you claim your homestead exemption.

    In Florida they can not take your car, but if you have multiple cars or a boat, etc., it can be liquidated.

    I have no idea for laws in other states but it is easy enough to read your state law.

    The reasons you live in one or the other is not material to your question and makes no difference.

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