Expert: Robert Vitt - 6/18/2009

Question
Hi,
We are about to file Chapter 7 BK we passed the means test but we have a
question regarding our property. We own a rental home in Lake Arrowhead
and like everyone else I know, we're upside down by a lot, the rental income
doesn't come close to paying the loan payment, in fact it misses by about
$800 per month.
We are more upside down in our primary residence by about $250K.
I have two questions,
Can we choose to keep the Arrowhead property instead of our primary
residence, or does the court dictate which house stays?
Secondly because we passed the means test, once we turn in a house does
the court then look at our debt to income after the fact and deny us a CH7
because we now have more disposable income
Thanks so much.

Answer
Jon,

Sorry for the delayed response.

Ques(1)Can we choose to keep the Arrowhead property instead of our primary residence, or does the court dictate which house stays?

Provided that you have sufficient value in your exemptions, you should be able to chose which house you keep.  You would clarify this in your initial filing by (1) your statement of intentions and (2) the total value of your exemptions.  


Ques(2)Secondly because we passed the means test, once we turn in a house does the court then look at our debt to income after the fact and deny us a CH7 because we now have more disposable income?

I cannot answer this question with absolute certainty, however, I will tell you that I have never run across such a problem.  This is because the means test applies to the initial filing of the Chapter 7 bankruptcy.  Usually, all of your debts are discharged and then your bankruptcy is complete.  This is a procedural point. Secondly, if this was the policy, then I do not believe that very many people would be able to adequately file for a Chapter 7 Bankruptcy.  

I apologize for the delay and I do hope this helps.