Should I file Chapter 7 Bankruptcy?

Question

I'm a realtor that has had my income cut to less than half. Here's my current situation. My home is the biggest problem.

I own a home that I owe $400K on. It is worth about $440K at best. I owe the IRS about $16K. Half of which is over 3 yrs old. That is the only amount (the 3 yr+ old amount) I can put into Ch 7 BK. I owe about $12K in credit cards that are past due. I'm 2 mos behind on my car payment so I know they're going to come get it soon. I am working now in sales but don't clear enough to pay all my bills. I'm putting my house on the market this month, but the market stinks so I do not expect it to sell before they'll foreclose. I'm thinking of moving out and renting a place and trying to sell my home, but if I can't then I am considering filing Ch. 7 BK. My income for the year is under 40K. I have no other assets. Does this sound like my only option- try to sell the home & file Ch.7 BK if it does not sell? I am also trying to rent my home. Thanks in advance.

I don't think selling it for less than is owed is an option. That is a short sale and I would be liable for the loss. If I sell it for $300k and I owe $400K then they will tax me on the $100K, that much I know. I am working full time so I am not sure that adding a business to the home is an option either. I bought the house two years ago at $350K and it was a great deal then, but I had to pull equity out to get by. There was no way to tell that the RE market was going to crash like it has. I do not make enough to stay in the home and pay all the bills..not sure I have any options at this point.

Answer 1

Its not that easy and you will still owe!

Liquify all your assets, the IRS will freeze all your accounts, so take all your money out: cd, stock savings, checking

DONT ignore the problem, Negotiate with the IRS, bank, credit cards. You do not own the house the bank does, you may have $40,000 equity but i DOUBT it.

Get another job, rent out a room weekly.
Sell things you own, garage sale for example.

Answer 2

Okay, First of all, you have to list ALL debt, even debt that isn't dischargeable, like tax debt that is less than 3 years old. Also, I find it hard to believe a realtor didn't see the real estate collapse coming. I saw it coming for quite some time (a couple years at least) as a bankruptcy attorney, with the rise of foreclosures and subsequently chapter 13 bankruptcies due to foreclosures.

If you talk to the mortgage company about your desire to sell the house, they should be willing to work with you especially if they haven't even filed the foreclosure action yet since that is less money they have to spend to get their money.

If you were to do a short sale, either you get them to let you off the hook for the deficiency, OR you could just file bankruptcy and surrender the house. At this point it doesn't look like there's enough equity for the trustee to want to sell the house, assuming you can get $440,000 for the house. But everyone fares better if you can get more than the debt amount on the house, not just you.

The IRS will gladly work out a payment plan with you, but don't be shocked if they file a lien on your house.

A previous answerer is wrong, the bank does NOT own your house, not until you sign a deed over (ie a deed in lieu) or they have the sale and get a sheriff's deed or equivalent.

You need to consult a bankruptcy attorney to determine what makes the most sense. You certainly shouldn't have a $400,000 mortgage with your income.

Answer 3

BK will NOT clear the IRS taxes. If may clear the late fees and interest.

First, the market is slow. GET a 2nd JOB!!!! If you are only making $40k, you have time on your hands. GET a 2nd JOB!

Get a room mate.

I would sell the house. Try a short sale for any loss.

And until the house is in forclosure, BK isn't a good idea.

Answer 4

WOW. You only made 40k this year and your house is worth 400K? Phew, I'd be scared.

I would try to sell the house. Sell it for cheap like 300K.
You will have a big lost but you will eventually grow big again.

wow, i just read back and didn't see that you owe 400k on the house alone. Seek financial help with a Financial worker.

This is terrible it's happening to so many americans because we want the best even though we cant keep up with the payments.

Answer 5

Hell no!!!! Why do people need to get married if they aren't having kids together? At the most just live together so his bad credit does not affect hers and she can make sure of the relationship before she is badly entangled if the waters get muddy and has to file for a divorce instead of just packing up and separating. Just love is NOT enough and stupid as well. THINK don't just emotion and use those rose colored glasses. It IS what it IS!!!!

Answer 6

Talk to a consolidator and they can help you put all your liabilities on one easy payment, don't event think about filing for BK it's awful and you'll feel miserable a person with good credit is worth millions, don't take the easy way, out fight for what you got, it took you hard work to get what you have at this point of your life but if none of these things work out than unfortunately you will have to go with BK.

Answer 7

my rule is NEVER file for BK.
under no circumstances.

also, before you lose the home--
consider converting it into an assisted
care facility or put in other small
biz's to cover your mortgage and
other bills.

and learn to find good RE deals!

[maybe sell 1/2 of your house to
an investor which will pay off all
your bills and bring your mortgage
up to date!]

Answer 8

some attorneys who specialize in bankruptcy may offer
first consulation free of charge or at a reduced rate.
contact one.