Personal Bankruptcy Chapter 7 Bankruptcy Questions

[saram]

These questions relate specifically to Schedules C, D and F in a Chapter 7 bankruptcy. Regarding Schedule D, Creditors Holding Secured Claims, the scenario is a house (primary residence) is valued at $145,000. The first mortgage has a balance of $131,000. Two equity lines of credit against the property were made; one has a balance of $25,000 and the other $7,000. Should all three of these debts be listed on the Schedule D? If yes how should they be listed in terms of the "Amount claimed" column and the "Unsecured portion" column? If no, should either of the equity loans be listed on the Schedule F, "Creditors holding unsecured nonpriority claims"? Regarding Schedule C, Is $14,000 the correct amount of money that should be listed in the Exemption Column for the primary residence? Can both of the equity lines of credit be dismissed in a Chapter 7 bankruptcy? Lastly, can $10,000 of government bonds be listed in Schedule C as an exemption?

 

[sammathew]

Chapter 7 is a law in bankruptcy, which emphasize on dissolving the previous credit of a person and the person can get a fresh start.

 

[despritfreya]

Should all three of these debts be listed on the Schedule D?

Yes.

If yes how should they be listed in terms of the "Amount claimed" column and the "Unsecured portion" column?

1st mortgage - secured $131,000; unsecured $0.00
2nd mortgage - secured $14,000; unsecured $11,000
3rd mortgage - secured $0.00; unsecured $7,000

Regarding Schedule C, Is $14,000 the correct amount of money that should be listed in the Exemption Column for the primary residence?

You should claim the full value of the exemption even though there is no equity in the home. If your state has a $14k exemption then claim $14k. However, if not claiming the homestead allows you to use it as a "wild card" then maybe do not claim it so that you can protect the bonds - see below.

Can both of the equity lines of credit be dismissed in a Chapter 7 bankruptcy?

All three loans will be discharged. Unfortunately, with the exception of the 11th Circuit and one or two judges in other states, you cannot strip off the wholly unsecured lien (3rd mortgage in your case) in the Chapter 7. Further, in no jurisdiction can you screw with a junior lien that has any value to it (the 2nd mortgage in your case) if the lender is secured solely by the debtor's principal residence. Therefore, while the debt will be discharged each lien will pass through the bk unaffected. If you fail to voluntarily pay the loans the lenders will continue to have the right to foreclose.

can $10,000 of government bonds be listed in Schedule C as an exemption?

Only if you find an exemption to cover them - unused homestead, wild card etc. Exemptions are state/jurisdiction specific.

Edt: Sorry this is a month late - did not see your post in June - since a stupid spammer brought it to the front - I saw it this go-around. Hope you were able to get your answers last month.

Des.