Bankruptcy option & income properties

[Homebody]

I am foreseen filing bankruptcy. I own my principal home which is upside down and was modified...I also own 2 other rental properties which are also upside down and even though the tenants are paying..I am negative on both. I am self employed and after expenses make about $5,000.00.

These are the amounts

Principal home

$746,000.00 $2079.00 payment (modified)
80,000.00 335.00 equity line payment trying to modify.


1st Rental- Tenant pays $2200.00

$180,000.00 $1175.00 1st mortgage payment
248,000.00 $885.00 equity line payment

2nd Rental- tenant pays $980.000

$166,000 $985.00 1st morgage payment payment
20,400 $95.00 equity line payment

These payments do not include payment of

I also owe $54,000 in credit cards which I have used to keep up with my business expenses and these houses have been vacant a few of the months these years. I dont have the extra money to keep trying to pay these houses and my own expenses.

I am over my head on these houses..can you tell me what would happen in bankruptcy courts to my properties?

I would hate to lose them as I have had them for many years, but I am losing sleep over them and cant even save for my retirement. These houses were my idea of retirement income and now in my 50's and see no point in owing them but headaches, lack of sleep and probably an early grave.

I would appreciate anyone's advise. Thank you.

[KFish]

Hi Homebody
I read your post with interest, as we are in a somewhat similar situation with our rental properties.

I am wondering if your rentals are located in a non-recourse state? If so, then you should consider walking away like many on this forum have done. We too are tired of spending our savings, credit cards, etc on our negative cash flow, upside down rental properties. Luckily, they are in Arizona, which, at least for the moment, is a non-recourse state for our properties. We have stopped making payments effective November 1st.

If you think you would qualify for bankruptcy, you may want to consider that. I am not sure how that will effect your properties though. For us, we decided the risk of letting them foreclosure was worth it. We were spending SO MUCH money on those rentals every month. It effects your financial future (my hiusband is your age), your free time, and your overall quality of life. IT ISNT WORTH IT! IF you can afford it, you may want to talk to an attorney and find out your option/consequences. THink of it as a long-term business decision as many people on here have said. Even if they come after you for the deficiency (depends on the bank and the state laws) you can usually settle for a fraction of what is owed. Many banks will not even bother due to the expense.

Good luck and keep everyone posted as to what you decide. I am sure you will get a lot of good advise on this forum, it's outstanding!

[Homebody]

Thanks KFish.

One of the properties is in Arizona and the other one in my home state of California.

But I dont want the banks to take my properties. I asked a BK attorney and she said that as long as I dont have equity in them, that I wont lose them....it will just eliminate the equity loans.

[KFish]

Oh ok...I guess I mis-read. I thought you wanted out. Is your goal to modify all of them? I was told that modifying rental properties is way tougher than your primary residence...and that is saying a lot!

[KFish]

Why do you want to keep them? Looks like a negative cash flow, youre upside down, and they are causing you a lot of headaches...? Youre stronger than I!

[Homebody]

I understand that I can keep them and just discharge the equity lines of credit..that is what is causing a lot of headache. I have been paying them now for 5 years and they havent gone down a penny.

I could continue to make payment on the 1st mortgage and eliminate the equities in a bankruptcy proceeding. Like that I will only have the principal payment on my residence and eliminate the $80,000 equity.

Keep paying the $1174.00 on princiapal and eliminate the equity of $248,500.00

Keepy paying the $985.00 on the 2nd rental and eliminate the equity of $20,400.00 on that one too, plus get rid of the credit cards I have been using to keep up with the payments on the equity.

I cannot modify the loans on the rental...already tried and they wont do it so my only option is to file BK.

[KFish]

Well, I would sit down and think about the pro's and cons...it's a tough decision. But I wouldn't beat yourself up over BK. It happens. My neighbors declared bankruptcy and still kept their home and vehicles. Less than 4 years later, they just got a great deal on a re-fi with the low rates. They said the banks don't look at it the same anymore. It probably will keep you from buying another home anytime soon, but you probably dont have any plans on doing that anyway? You can re-build things and put everything behind you.

The key thing is...do what is best for you. Don't worry at all about what people think, etc. It's a business decision.

[Homebody]

Yes..it is a tough decision..I never thought of myself filing BK..always been responsible..but I am thinking I am 54 years and my dreams of retirement are tied up to these morgages and I dont know when real estate will bounce back and I can get my money out. Right now I cant even save for retirement. I do have to think for my own health and peace of mind and right night all I do is work to pay these bills up. I was doing ok until the renters moved out and one of them destroyed one of the houses and I had to pay close to $10,000 last July..then being self employed my business has dropped about $3,000.00 per month.

Anyway..I am going to wait a few months because I understand you cant use your card for the last 3 months before filing BK..so I have to hold still for a while. I was still trying to modify a loan with Wells Fargo..my rental in Arizona so I have to see what they are going to come up with. I am going to have a hard time explaining it to my adult children..they have always thought of me as being very responsible...that is my only concern.. I dont care about anyone else.