Expert: Terry Leeders - 12/13/2007

Question
I’m 72 and filed for chapter 7 just recently. I have a home with a 167,000.00 reverse mortgage and home’s fair market value is 250,000.00. I live in NJ with no exemption law and must use the federal with a max of 18,000.00. My question is can the trustee sell my home for remaining equity or does the fact that the reverse mortgage is based on the equity at the time of the loan, 250,000.00, that there is no equity left which means I can keep my home?

Answer
The trustee can perform a liquidation analysis.  They will subtract estimated costs of sale (conservatively 5% of the Fair market value) then subtract your mortgage balance at the day you filed the case, then subtract any claimed exemption.  If there is any equity left, the trustee has the power to liquidate the asset to pay your creditors.  The trustee will usually do so if it would pay a 10 cents on the dollar dividend to your unsecured.