Afraid of losing his house because of his huge taxi medallion loan, he followed his friends’ advice: he took his name off the deed, leaving his wife as the only owner. MISTAKE: There is now a 6 year wait, during which the transfer can be challenged. If he files bankruptcy during that period, the Bankruptcy Trustee will sell his house. If the taxi lender gets a judgment against him, they might do the same.
Of course, if he he continues to pay the medallion loan for 6 years, he may be safe. But he is in his 60’s , has health issues, and that will not be likely. Furthermore, he can’t afford the payments. Because of his health, he has leased out his medallion for $950 per month. So has gone back to work, leasing another taxi for about $135 per day, yet he only nets $80 to $100 per day due to market conditions. He has to rely on his wife’s income to pay the balance of the monthly note. They have driven almost two hours to see me, looking for a solution.
And there is a solution.
Under New York law, each owner of a home can protect approximately $170,000 in equity over the mortgages, as a “homestead exemption”. I suggest they voluntarily transfer the house back from Wife to Husband and Wife. That creates protection for $340,000 in equity over the mortgages.
If there is no equity left, he can file a chapter 7 bankruptcy case.
If there is equity after deducting the mortgages and the homestead exemption, he has two other choices. If they can borrow the difference from friends and family after the bankruptcy case is filed, he can file Chapter 7and then pay the Bankruptcy Trustee that lump-sum. If they can’t borrow that money, but can afford to pay it over five years, he can file a Chapter 13 payment plan and still save the house.
In this case, there still may be other options, which we are still investigation.
The bottom line: when there seems to be no options, look for professional advice from a Board-Certified Bankruptcy Attorney to help develop a custom solution.