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Old 07-17-2010, 06:32 PM
 
5,697 posts, read 19,096,323 times
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I spend some time on these forums offering advice as I know a little about bankruptcies but the situation i am about to speak of is beyond my knowledge. I am wondering of there are any lawyers or skilled individuals that may be able to offer advice.

Please note, if you join this thread to offer nasty comments then choose another thread.

I have an elderly family member I will call "Sue" that told me last year she
was in a financial mess. "Sue" met with a lawyer and he suggested due to her age (68), poor health it would be in her best interest to file. Sue still works full time but really needs to retire. She has chosen not to at this point due to the money mess. This is the breakdown of her debts.

20k in credit cards

primary home with a mortgage of 65k. CMA came in at 45K (underwater)

rental property with a mortgage of 75k. CMA came in at 25k (underwater)

vacation property with a mortgage of 28k. CMA is almost unattainable because no properties have sold in that area in 5 years.

The biggest problem out of all of this is that the vacation property also has a co owner. Another family member I will call "Tom". When the property was purchased, 8 yrs ago, the purchase price was 85k. Sue and Tom put down 10k each and financed the rest individually. Sue got a mortgage on the vacation property and Tom obtained a equity mortgage on his primary home and put down cash at closing. So Tom's part of the vacation property is free and clear so to speak where as Sue has a remaining balance on the property of 28k.

The bankruptcy lawyer met with Sue and Tom both to discuss the vacation home. A CMA was hard to get because no properties in that area have sold in 5 years. It was determined a true CMA was hard to get so the lawyer suggested print outs on homes for sale in that area. The highest value was 60k but the home was 3 times the size of Sue and Tom's vacation property. It was not a good comparable. Tom suggested buying out Sue but the lawyer advised against it because it would look like she obtained a profit. Sue went to court and the trustee looked at everything. It was decided that Sue would keep her primary home and vacation property because of the co ownership with Tom. The trustee did question the vacation property value and Sue stated that it could be valued at 60k but the listings in the area show only 2 for sale and are 3 times the size of her vacation home. Both are listed at 60k but have not sold. I personally think it was a mistake by throwing a number out there without proof. The trustee said fine and the bankruptcy was granted. December of 2009, Sue received her discharge papers in the mail.

On February 1, 2010, Sue received a letter from the court asking for CMA information on the vacation property. After several weeks of research, a realtor stated it was not a true CMA as no properties in that area have sold in 5 yrs but if he were to get the listing, he would try at 40k. He said he could not even guess at what it would eventually sell for. The lawyer Sue hired told her that this was a waste of his time and he needed to get her case off his docket. He suggested she offer to pay the court 13k to see if they will just settle it all. Sue does not have 13k. Sue submitted all the CMA information to the court. Sue contacted the lawyer after a month with no word and his advice was "no news is good news. Sounds like it went through." In April, Sue received another letter stating from the court that she needed to provide information on her mortgage as the trustee has determined she has at least 30k in equity. Apparently they are not taking the realtor CMA she provided into consideration and are still going by her estimate of 60k. Which would give her about 30k in equity but that is actually the money Tom put down.

Sue contacted another lawyer when her lawyer stopped returning her calls. He has washed his hands of the case. The lawyer that Sue spoke to on the phone said the whole situation was a mess and no lawyer would touch her case with a 10 foot pole, including himself. If the trustee still had questions, it never should have been discharged. The lawyer on the phone suggested Sue just deal with the trustee on her own. Sue mailed another letter explaining the situation with the co ownership and how the property is not valued at 60k but for much less and it is undetermined due to no sales in 5 yrs. She provided the CMA information again along with the realtors explanation of the market situation in that area. Again, no word for over a month.

Sue then got another letter from the trustee stating they want to see Tom's financial records proving that Tom put money down and his mortgage papers from the equity loan he received on his primary residence. Tom agreed to this but also stated that he recently paid off his equity loan. The court is looking to see if there are two liens on the property. There is not, just the lien from Sue's mortgage. Apparently the trustee does not understand that the property is probably only worth what Sue owes. She could sell it but it would only pay off the mortgage and there would be nothing left to pay any remaining creditors. Also, the money Tom put down on the property is a complete loss now, so essentially he would lose everything. The money he put down and the property if its sold. We are now into July and it still not settled. Sue is again submitting more information regarding the property and everything is up in the air on whether or not the court will decide if this property will be sold. This is such a mess that I have no idea what to suggest to her since two lawyers she has contacted told her they wont help.

Suggestions?
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Old 07-18-2010, 08:25 AM
 
16,956 posts, read 16,693,312 times
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The trustee might likely force the sale and take anything they can get to pay the creditors. Even if it's very little...

It is considered an asset.

She had 3 properties at time of filing. Primary , Rental and Vacation home.

The court will always normally want her to sell two of those and hand over the money to pay her creditors .

Each state law is different . In most cases you can keep your main house and one car . ( with reaffirmation ) Everything else belongs to the trustee so to speak...
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