Expert: Norma Duenas - California Bankruptcy Attorney - 2/8/2010

Question
Hi,
I have a primary house that is upside down, and my 2nd house is not but we took an equity loan from the 2nd house about $100k.  The 2nd house is worth about $160k. We also have an un-secure debt of about $60,000, and was thinking of filing chapter 7 to save our house. Can the creditors go after my 2nd house because I have an equity of about $60k?  I'm in California.  Any advise is greatly appreciated.

Answer
Your unsecured creditors can eventually file a case in court, obtain a judgment and record a lien against both your primary house and the house that has equity. If you file for bankruptcy a stay will be put in place that will prevent your creditors from obtaining a judgment or recording a lien against your real estate.

I am unclear from the information that you provided if you are currently behind on the payments on your primary house. If you are, then more than likely you should look into filing a Chapter 13 to catch up on the payments on your primary house. You mention that you have equity of approximately $60,000 in  a 2nd  house. You need to be aware of the California bankruptcy exemptions and what can be protected in a bankruptcy case. California has a bankruptcy exemption protection which can protect from $50,000-$150K in equity in a home (the amount depends on factors such as family unit, age, and income). Please keep in mind that this has to be your residence and not a separate property you own. These bankruptcy exemptions allow you to protect assets in bankruptcy without the creditors having a right to touch these assets. You should review your assets with a bankruptcy attorney, so you can be advised correctly as to what assets can be protected in bankruptcy and what exemptions should be used. If you need further assistance you may contact me through http://www.socaladvocates.com