Can someone explain home equity? + other ?'s

[momof3b1g]

Ok we are serious about filing a Ch7. But of course have tons of questions and concerns. Many I have tried to find awnsers to on the net by reading and asking. But haven't gotten the awnsers.
Can someone please explain these to me....

1. If we owe less on our house then its worth does that help us in a bankruptcy? (We are not behind on payments and will be keeping the house.)

2. Nobody has been able to explain the list we need to make for the trustee of our assests. What exactly needs to be listed? We are a family of 6. With 4 kids with alot of property. Nothing fancy though we do have computers, the kids have tv.s What are we going to have to give up? Or what/how much are we going to be able to keep? A big concern is that the kids will loose stereo's etc from their rooms. Most which were gifts from grandma.

3. Can someone explain to me if we have $35000 in debt how does the trustee figure what assests/amount to take?

4. Dell and Fingerhut, will they want anything back? if so how far back and what amount? I don't remember what we bought at Dell. We paid it off once in 2003, then again 2005. Don't remember if we had any big purchases in the last 3 years. The biggest purchases we have had are our computers which are over 3 years old.

We are looking to file asap. Don't want to wait and I don't think any of the purchases on our accounts is anything to worry about.

[1time2many]

Broad question that realy can only be answered by a BK lawyer. You would b wise to talk to a couple diffrent ones and find one who realy is an expert in the new BK law.

[momof3b1g]

We have an appointment Friday but until then, these questions are running around in my head. :confused:

[1time2many]

Understandable, but with the BK reform everything is realy complicated, but I see this reform being repealed in 09 or early 2010, to many peeps going under and the old law was enough and better for everyone involved.

[jq26]

Broad overview:
1) Equity = the amount your home is worth above and beyond the lien amount. The lien amount is the amount you owe creditors where you pledged the home as collateral (ie purchase money and home equity lines). In Chapter 7, you can only exempt a certain amount of equity in your home. Exempt means you state it on your schedules but creditors cannot get at it. It is yours. So it depends how much equity you have. Under federal exemptions (you may be in the state exemptions or may be in federal- depends on your state), you can exempt up to $11000 in home equity per filer. More than that and you risk the home being yanked by the trustee to be sold for the benefit of creditors. If the trustee cannot sell it and make a "meaningful distribution" to creditors, then the trustee will likely not sell it even there is some equity that is not exempt.

2) You basically list everything. The you exempt most of it. Yes, it seems a bit intrusive but that's the trade off for federal protection from creditors. You can group many things, such as "clothing" and "toys". They are of little value. The trustee wants to see what you own. Most of it is garage sale value. Don't overestimate the value of your stuff. Most TVs that are a few years old are almost worthless- maybe $25. Clothes? Probably worth $100 in total. Look at what its worth at a Thrift Store. Then you exempt most of it.

Quite honestly, if you dump $35000 in debt and start anew, your kids will be beneficiaries of that fresh start. Worrying about stereos is really missing the mark. This should be a major once-in-a-lifetime event. Nevertheless, I doubt the stereos will be removed and sold.

There is a very long list of documents that you will need to attach to the filing. Tax returns, some sort of proof of property value (your attorney will likely have an online appraisal), last 60 days of paystubs, bank statements, annual statement of SSI, SSD, or any sort of assistance, etc.

3) $35k in debt doesn't make a difference in what the trustee has access to.

4) If your purchases were years ago, then no worries. First, they are unsecured creditors just like everyone else. They can't "ask" for anything back. Fingerhut or Dell would get an equal piece of the pie if there is a pie (assets for distribution). Here, there wil be no pie for anyone so no worries.

Most important, don't file until all negative stuff is behind you and you are monthly cash positive again. From the date of filing, you would not be able to seek BK protection for 8 years. So make sure you are ready to go and on good financial footing before pushing the button.

Good luck

[momof3b1g]

Thanks jq for posting and clearing up some confusion. I'm assuming they no longer go by the only 1 tv per household type of rules/laws? As long as long as the totals are under the exemption amount?

I can't wait to ask the lawyer all this but from what my inlaws said things like a snowblower was not exempt we could use a shovel. Does that sound right?

Things that have come to mind is like if we have 2 vaccums will they take one? Or is the value of them what they look at not quantity?

Could you explain this...
Most important, don't file until all negative stuff is behind you and you are monthly cash positive again

[willingtocope]

Snowblowers and vacuums are NOT a problem. The trustee would be looking for really large ticket items that you own outright....things like snowmobiles or jetskis.

The trustee is not going to come to your house and pick and choose until he has a truck full of stuff to take to the local second hand store to sell for a couple hundred bucks.

[momof3b1g]

See thats what i have been thinking, but dh parents filed recently and they could not keep certain items. They even had to pay for some things if they wanted to keep them.

We don't have anything large like jet skis or snowmobiles. FIL said they would take things like nascar memorbilia, DVD's etc.

UGH, its going to be a long few months. :(

[bingo]

Could you explain this...
Most important, don't file until all negative stuff is behind you and you are monthly cash positive again

Because, you must be able to support yourself post bk. No need to file if you still are running a deficit every month. You want to be able to get all debt in the bk package. A bk will do you no good if 6 months down the road, you can't pay the utilities or the mortgage.

[momof3b1g]

Ok yes i understand that, its all the cc's that are putting us behind every month.

[Methuss]

See thats what i have been thinking, but dh parents filed recently and they could not keep certain items.

It really comes down to the trustee you pull. Some of them are very easy going and won't go after assets unless they can recover a decent amount, and some others are just plain nasty and will go after every dime the creditors are entitled to.

So you have one more question to ask you BK lawyer before you file. "What are the trustees like for this district?"

In my district there was one out of four trustees that was, as my lawyer put it, "a real jerk" that went after every penny. That meant I had a 25% chance of pulling him and having to drill down to listing every item I had. I didn't pull that trustee so it was a simple matter to just lump everything under hosehold goods and be done with it. But you should find out and be aware that it can happen.

Like jq26 said, it all comes down to garage sale pricing. A trustee selling something won't recover more than that and he has administrative costs to consider (recovering the item, cleaning it up, selling it, etc.). If there would be nothing reasonable left to give the creditors after all those costs are added in then there is no legitimate reason for the trustee to take the item.

So, by example, the dress you think is worth $50, probably would sell for $5 at a yard sale...after paying someone to go get it, dry-clean it and then a commission to sell it would add up to exceed the $5 they would get for it. But, in another example, a $4500 ATV would be worth something. The trustee may recover $1000 for it after all costs are added in...if you have five unsecured creditors that's $200 to each of them. You can bet the ATV would be taken then.