He could not stand the pressure of the monthly note payments so he visited us for advice. We determined that he could not file chapter 7 bankruptcy because his house was worth too much. It appraised at $485,000 and he had paid down his mortgage to $63,000. That left $422,000 in equity. His wife owned half the house, so his share was worth $211,000, but he was entitled to a homestead exemption of only $165,000. That left $46,000 of equity that could not be protected. If we filed a chapter 7 case, the bankruptcy trustee would ask him to pay a lump-sum of $46,000, and if he could not pay it, the Trustee would sell the house.
So, instead, we decided to file a chapter 13 installment-payment plan. The client is paying the chapter 13 Trustee $46,000 at the rate of $900 per month for five years to “buy-back” his equity in the house. 90% of that money is being paid to the bank to satisfy the $600,000 taxi loan. He has surrendered the medallion and his debt is eliminated. He can now lease another taxi and keep the weekly profits instead of paying $3,400 per month on the taxi note.
If this strategy sounds like it would be good for you, please give us a call to see if you would qualify.Paul Hollender – Board-Certified Bankruptcy Lawyer – 40 years experience.