Expert: Terry Leeders - 10/31/2008

Question
Dear Terry,

My husband and I are in foreclosure on one rental property and two others are following close behind.  My husband has been in & out of the hospital since spring and is on a list for liver transplant.  We paid for nearly a year on these properties which never got tenants and had no cash flow.  We have tried to work things out with the mortgage companies and one is telling us to do a Forbearance Plan to stop the foreclosure.  Within the agreement there is a stipulation that we cannot file Chapter 7 bankruptcy.  We have a realtor that is trying to do a short sell on the property.  We cannot afford to lose our home residence.  Can any of this affect our primary residence and should we file chapter 7 as we will have to do the same thing with the other properties (which we are trying to sell as well).
We are overwhelmed with all this and want to make the right choice for down the road because there are going to be tremendous expenses for my husband in the years to come.


Answer
IF you are considering Chapter 7 a thorough review of income and expenses, as well as an asset evaluation are needed to confirm what assets would be protected in filing a case.  You should speak to a local attorney to assist you.  I am in Chicago area.  Each state has protections, called exemptions, to protect some personal assets.  IF your assets are more valuable than can be protected, then a chapter 7 trustee can liquidate them to pay the bills.  So, it will come down to what your home is worth, and what is owed on it to see if you can qualify for chapter 7.  Otherwise, you would look at chapter 13 to protect your assets.