information about Bad Credit Mortgage in New York
Two years ago, when I was unable to sell my previous home, I leased it
out long-term to a good friend who is faithfully paying the rent and
has the option to buy after a period of 36 months. His rent covers the
first mortgage of about $40,000 plus a home equity loan with another
bank, with a balance of about $5000. The tenant figured it would be 36
months before his credit rating would be good enough to get his own
mortgage because of a bad mark on his credit.
I have been living in a new home the past two years. There's a new
mortgage with yet another bank. Between my consumer debt (about
$12,000), the new mortgage, and some bad luck, I've gotten in over my
head and stopped paying for the unsecured debts about one year ago. I
am currently being served papers by two of my creditors and have
pending judgements. One of them, Beneficial of New York, is ready to
garnish my wages. I'm finally ready to hire an attorney. I don't know
how I'll pay for one.
My question is that if I declare bankruptcy, what is likely to happen
with my tenant and the house? Are there any solutions that would allow
him to keep his home, assuming he doesn't have enough for closing
costs right now and/or may still have too low a credit score to
qualify for a mortgage? Would it make any difference between my
pursuing a Chapter 7 or a Chapter 13? I live in New York State.
There is certainly a difference between Chapter 13 and Chapter 7.
Chapter 13 is a repayment plan that, if you qualify, would allow you
to keep the house and probably continue your present deal with him. I
don't think Chapter 7 would be feasible for you, assuming of course
the facts you have given. If you file Chapter 13, most of the
payments you made to an attorney would come out of your payments over
the life of the plan, not up front.
I practice in NY and would be glad to answer any questions you might
have, if you are able to give me more detailed information.
I would need more facts to give you a definite answer, but you have to
consider two things:
1) You can only file Chapter 13 if you have enough excess income to
file a plan (make monthly payments). In other words, you would need
some source of income to pay the court the necessary amount for the
plan to work. If both attorneys say you don't have enough excess
income to do so, that likely means you can't file Chapter 13. It is
possible to have a friend or relative help you with this by agreeing
to help you with the payments.
2) In NY, only your primary residence is allowed an exemption, and
then for only $10,000 ($20,000 if you file jointly). If you file
Chapter 7, you can't keep equity in the rental property for yourself,
that isn't going to happen...and if you a significant amount of equity
in your primary residence (over ten or twenty thousand), you might
have a problem there, too. Keeping your payments current is
necessary under either Chapter 7 or 13, but that doesn't determine if
the bankruptcy trustee will act to take these assets. To know that,
you have to first know how much equity you have in each property.
From what you have said, I think the second attorney makes more sense.
If someone tells you you can keep equity in a rental property in a
Chapter 7, I think that is incorrect. Is it possible to refinance
the houses and pay the debt you owe?