How can an hot real estate market wreck your Chapter 7 bankruptcy?

February 12, 2021 00:18:18
How can an hot real estate market wreck your Chapter 7 bankruptcy?
Kelly Bankruptcy
How can an hot real estate market wreck your Chapter 7 bankruptcy?

Show Notes


Intro Speaker: It’s time for KellyCanHelp hosted by Jeff Kelly, Attorney at Law with the law office of Jeffrey B. Kelly. And now here’s Jeff Kelly.

Jeff Kelly: Hello, this is Jeff Kelly. And in today’s episode, I want to answer the question, is it possible to lose your home in a chapter 7 bankruptcy case? And the answer is yes. You know, this current real estate market is unbelievable. I’ve, I’ve been in practice since 1998. And I’ve never seen anything like it. I’ve never seen a real estate market where somebody in Rome, Georgia can put a house on the market and it sells within a week. So, because of that real estate values have become very problematic for chapter 7 clients. Let me give you an example. Let’s say you have somebody who, you know, 10 years ago, they bought a house for $100,000. And today, the tax assessor says it’s worth 120 Well, that wouldn’t be a problem. In in Georgia, a single person can exempt $21,500, a married couple can exempt $40-43,000. So when when could it become a problem?

Jeff Kelly: Well, for one thing, even though the tax assessor says the house might be worth 120,000, it’s possible that it’s worth more, and a chapter 7 trustee. They are not bound by what the tax assessor says they’re not bound by what Zillow says, you know, honestly, they’re not even bound by what an appraiser says, a chapter 7 trustee has a strong incentive to sell your house if they can make money off of it. That’s, that’s how chapter 7 trustees generate extra income for themselves as by selling assets and paying debts in chapter 7 cases. So they usually work closely with a real estate agent. And that real estate agent has a right to drive by your house, if you’re in the middle of a chapter 7 case. And that agent may look at it and say, Hey, you know what, I know, the tax assessor says it’s worth 120. I think I can get 150 for it. So let’s say, you know, a single person is filing a case under these facts. Well, hypothetically, if that real estate agent puts that house on the market, and sells it for 150, it’s gone. Now the person who filed chapter 7 will get a check for $21,500. Because that’s the amount that we’ve exempted in this hypothetical. So they it’s not like they lose their house and have nothing. But many people who consider chapter 7 say, hey, look, if I, you know, if I wipe out all of my debts, but end up losing my house, and yeah, if I got $21,500 in my bank account, at the end of the day, that’s not a win for me, because I can’t lose this house, I don’t want to lose this house, I love this house. We’ve been here, you know, 10 years, whatever.

Jeff Kelly: You know, if that’s your situation, then you don’t want to file a Chapter 7, you just don’t, because another thing that kind of sneaks up on people that a lot of people just don’t quite get is that if you’re in the middle of a chapter 7 case, and you don’t like the way things are going, you can’t just bail out. You can’t just quit when a chapter 7 trustee has a contract on your house. It’s going going gone. Now, I’ve had a lot of clients asked me before, you know, surely this can’t possibly be real, you know, lose your house in the middle of a chapter 7 bankruptcy case. They can’t take it away. I know they can’t. Oh, yes, they can. Welcome to the State of Georgia. Oh, personally, I think we need to increase those exemption amounts.

Jeff Kelly: And I think they probably will in the in the coming years. But currently, it’s $21,500 for an individual $43,000 for a couple. So I was just talking to a guy the other day who had a similar set of circumstances here and you know, we went through it Hey, option one. You you roll the dice 10 you you file chapter 7, and you see if the trustee thinks he can get enough for your house to cover your debt. Option number two, you could You could file a Chapter 13. And whatever we figure out the value of the house truly is, then the key is there’s this legal concept called the liquidation test. And if you do a chapter 13, and you pay back your creditors the same amount of money that they would have gotten if you had filed chapter 7, then you pass the liquidation test and all chapter 13 plans must pass the liquidation test.

Jeff Kelly: That’s the rule. So for example, hypothetically, again, let’s say this guy, how would this work in a real life situation? Let’s say this fella owes $50,000 in credit card debt house is worth 150. We only owe 100, we’ve exempted 21,500. So we’re going to take that 50,000, deduct 21,500, we’re going to use that balance in chapter 13. And that is the amount of money that we would have to pay over a five year period to the creditors to protect his equity in the house. Now we can deduct out amounts for how much would real estate commission be that that does get to be allowed to be deducted out as well. And typically will take somewhere around 10% of the sales price for the deduction. So it’s possible in this scenario, so we got $50,000 of equity, we deduct 21,500. And we add on another 15. And you know, we’re not paying the full balance of the credit cards back, we’re only paying back the amount of money that is needed to pass the liquidation test.

Jeff Kelly: So another option, you know, again, is, you know it another thing that I want to emphasize about chapter 13, that a lot of people like is that if you do get in the middle of chapter 13, and you decide you don’t like the way things are going, you get a big pay raise you you you don’t want to be in it anymore, you can voluntarily dismiss a chapter 13 whereas you can’t with a 7, you can with a chapter 13, you can quit that case anytime you want.

Jeff Kelly: Now, another thing about chapter 13, I want to emphasize in the show today is if you are behind on car payments, and you are worried about your car getting repossessed, give us a call, let’s talk because chapter 13 stops the repossession of your vehicle. Basically, what we can do is take the entire balance and spread it out over five years and see what kind of plan payment we can come up with. For a lot of people, they have really high high interest rates on some car notes. As a general rule, we can knock it down to somewhere between 5 and 6%. Right now in a chapter 13 plan. So if you’re behind on car payments, don’t let your car get repossessed, give us a call, let’s talk, let’s come up with a plan that works for you. That takes care of all your debts. And chapter 13 does that chapter 13 is a consolidation of all your debts, if you’re behind on mortgage payments, we can stop the foreclosure of your home with a chapter 13 whatever your arrears are, we’re going to spread those out over a five year period. We can eliminate credit card debt and medical debt, things like that. And in some chapter 13 plans, again, it’s going to depend on your set of facts. It’s going to depend on how much money you make is going to depend on what type of assets Do you have, like we talked about earlier in the show about the house? You know, do you have equity, how much equity, there’s a lot of factors that go into your payment. But you you really should take advantage of a free consultation and call my office at 706-295-0030.

Jeff Kelly: What we would like to do is set up an appointment with you. And again, we want to go through all your assets, all your debts, all your income, all your budget, and then at the end, come up with a plan that works for you if chapter 7 is the best option, we’ll explain to you why. If it’s not We will also explain to you why it’s not. We don’t cover all your options. And you know, honestly, it’s sometimes in some cases, it might be better to talk to them a banker about getting a equity loan out of the house because with an equity loan, you can spread the debt out between 15 and 30 years. So we’ll we will look at it we will go over things with you. We will give you our honest assessment. If you get a chance. I want you to check out my website, we’ve got a lot of blogs written on there about a lot of different topics in there, searchbar up there.

Jeff Kelly: I’ve also written a book on chapter 13 and chapter 7, and you can get a free copy of it. Just go to my website, scroll down to the bottom. And if you’ll fill it out, we’ll email you a copy if you would like a hardcopy, call my office and we will mail on to you while supplies last. And I also want to talk about a I have a podcasting website, So if you get a chance, please check out either one of those resources. If you want, if you need to email us, you can shoot us an email at [email protected] Again, that’s [email protected] Again, main office number 706-295-0030.

Jeff Kelly: So I want to talk a little bit more about the process of actually getting your case filed very quickly. Right now about the only the only good thing that has come out of this COVID-19 mess that I see is the courts will now allow us to file your case without you leaving your home. And even your court hearing can be done without you leaving your home. So what what we do, you know, after you call us, we go through your first initial appointment, if you decide you’re going to move forward, then we’re going to want to get a copy of your credit report, put all the pertinent information into a bankruptcy petition. And then we can call you on the phone and we can go over the petition with you page by page, we can mail it to you, you can sign it and mail it back to us. Or we can use a program called zoom, where we do a screen share meeting with you. And we can go through it every page that way. And we can use a DocuSign type of service that will allow you to sign it electronically. And again, your court hearings right now are done remotely over the phone I I anticipate it’s going to be this way for at least the next six months.

Jeff Kelly: Because you know with COVID number shooting up in the current state that we’re in, but Gosh, I hope we get through this COVID mess. Soon. I, have you had enough of it. So I want to finish out here with a quick devotion. I like to do that at the end of each podcast that I’m doing by myself. And this week, some verses that were really, you know, kind of heavy on my heart is you know, with with everything going on with the election and the uncertainty and the mess that on the Capitol.

Jeff Kelly: These are scary times. Really scary. I never in my life thought that I would live to see the day in America where a large company like parlour I mean, it’s like half a billion dollar company could literally get wiped off the map in one day. It’s it’s some interesting times about free speech, interesting times about politics, and scary times with this COVID and the numbers going up and the effect on the economy and the shutdowns.

Jeff Kelly: And I really felt like God laid this verse on my heart, Proverbs three, five and six. Trust in the Lord with all your heart and lean not on your own understanding. In all your ways acknowledge Him and He will make your paths straight. Trust I’m gonna read again and Trust in the Lord with all your heart and lean not on your own understanding in all your ways. acknowledge Him and He will make your paths straight.

Jeff Kelly: And I’ll be honest, I’m not a pastor. I’m not a super Christian. I’m just an average Joe. I’m an I’m an attorney. I’m a good bankruptcy attorney. I’m not a I’m not a pastor. I am a Christian, I do feel obligated to share what I believe, to the world to help to help people to help love people. And I hope that this message today will help some people out there who are really worried who are scared because God can help us get through it. God is in control and it’s kind of funny, I was praying this week. You know, Lord, I’m scared about 2021 I can’t make it through without you. I really felt like God kind of laid it on my heart that the real hard truth is that I’ve never been able to make it through any year without him. And he’s always come through. And 2021 looks scary. I’ll be honest, it does. But God will come through he will get us through it. And if if if we put our faith in material things, it’s not going to work out. If we put our faith in our bank account, it’s not going to work out, we put our faith in our job, you know, you you could potentially lose your job.

Jeff Kelly: I think. I think that we’ve got to rely on this verse. Trust in the Lord with all your heart. Lean, not on your own understanding, in all your ways. acknowledge Him, and He will make your paths straight. If anybody out there, if you do not know Jesus Christ, I just encourage you to get down on your knees in prayer prayer that goes something like this. Lord Jesus, I want you to be my Savior. I quit. I give up. I want to give all the control to you. I want to follow you. I want to learn your ways. I want your peace as fast as all comprehension. Thank you, Lord, for the gift of your salvation. accept the gift and receive it in Jesus name. Amen.

Jeff Kelly: And if you need to talk further about anything Christian Christianity was related. I want to encourage you to check out living waters church, got a good friend there. His name is Sam Bice and he is awesome and his phone number is 706-234-7363. And his church is located in our marching at 26 little Texas Valley Road. super great guy really knows the scripture well and really can help you come to know Christ. Thanks again for tuning in today. Really appreciate you guys. Hope you have a great week. Thank you.

Outro Speaker: You’ve been listening to KellyCanHelp with Jeff Kelly reached out to the law office of Jeffrey B. Kelly today by phone 706-295-0030 in Rome or visit

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