Expert: Mark J. Markus- California Bankruptcy Attorney - 5/23/2009

Question
We have 2 houses.  2 years ago we upgraded and rented out the first house.  My father is very sick so we finally decided to move in with him and needed to rent out the 2nd house.  We were able to make the payments on the 2nd house but the credit card debt that we have was digging us deeper and deeper.  When my dad needed our help we figured this would be a good time since the debt was killing us from our credit cards.  Here is my question.  We are consulting on filing chapter 7 however we want to keep the houses.  The 1st house has a first and a 2nd on it.  The rent only covers the 1st and a portion of the 2nd but does not cover property tax or insurance. The 1st is $234000.00 the 2nd is $166000.00.  The value of the home is $236000.00.  We are way upside down and if we sell it would be a short sale.  To a degree we are still able to stay afloat even though we have been paying out of pocket to keep the house. The 2nd house we want to keep because we do not know how long my dad will live and would like to have our home to move back into.  Starting May 1st 2009 we are renting it for $2400.00.  The fully amortized payment is $2800.00 however we have an option arm for another 3 years so we are paying $2000.00 on the loan which covers interest and applying the balance $400.00 to property taxes.  The houses around us have sold for between $421000.00-450000.00.  We owe $436000.00.  What is the likelihood that Bankruptcy court would require us to sell the homes?  We have received 2 different answers from different attorneys and are now scared to proceed.

Answer
There's no chance of the Trustee selling the first house.   As to the 2nd house, it's highly unlikely it would be sold given the numbers you provided, but it may depend on what exemptions you have available to you under applicable state law.  There's insufficient information to answer that further.

To see more on exemptions, please visit http://www.bklaw.com/exemptions.html