Expert: Terry Leeders - 8/9/2008

Question
I want to go thru Ch. 7, alone i.e. without my wife.  Our assets our separated -- we live in a condo that she owns.

However we do own together, as husband and wife, a resort condo, with a $460,000 mortgage, upon which she makes payments of interest only, and the payments have never been in default.

We bought the property in 2004, and the value has dropped to an amount now about equal to the mortgage balance.

Question:  Will the bank take any action when I file ch. 7?

Could they declare the mortgage in default and proceed accordingly?

Would they be likely to?

Could other creditors force us to sell the property in order to realize on our "equlity"?  Would they first have to establish that there is any equity?

My creditors are 2 credit card companies that  I owe a total of about $40,000, that was incurred not thru purchases, but thru promotional 0 % "balance transfer" loans that I have been juggling around for 3 or 4 years, and all are current, but my wife is no longer willing and able to subsidize my payments, and therefore default is imminent plus due to inflation and a recently arisen obligation to assist in the support of my 38 year old disabled daughter and her three children, I just have to get out from under these credit cards.

Any suggestion you can provide would be appreciated.

PJRosewarne

Answer
A short answer is that the court can object or else you may not otherwise pass the means test as they look to all household income, including your spouse.  Since you are paying for luxury property, you can draw an abuse objection, whereby you can pay back a portion of the debts under chapter 13.  Talk to a local bankruptcy lawyer to help you with the budget analysis to see what chapter will be best.  Normally, you can reaffirm debt if you are current and continue to make payments, it would not go into default.