A common question we get from our clients and prospective clients in New York City, Nassau. Suffolk and Westchester Counties is whether they will be able to keep their homes if they file for personal bankruptcy.
This is Part I of a two part series on this issue. In this Part I we will look at the information we need to answer the question of whether a debtor will get to keep his or home in bankruptcy. In Part II we will look at different bankruptcy strategies that can be used in different situations.
1. Value of the Home. This is the critical starting point question. It is always surprising how many people considering bankruptcy are not aware of the current fair market value (FMV) of their home (i.e., house, condo or cooperative apartment). Anyone considering a personal bankruptcy case needs to obtain current and accurate information regarding their home’s present value (FMV). Free online home value estimates (such as zillow.com) are not useful because they will not be a trustee or bankruptcy judge as evidence of value. A Broker’s Price Opinion is a good potential starting point However, the best evidence of current market value is a written appraisal report prepared by a licensed appraiser. In NY the current fee for an appraisal is about $350 – 550 depending on the whether the house is a single family, two family or three family house.
2. Debt on the Home. In addition to the current fair market value of the home anyone considering a personal bankruptcy filing needs to know how much secured debt there is on the home. Secured means that the loan has a mortgage on the property (such as a first mortgage, second mortgage, and/or home equity line of credit). A payoff demand from the lender is the best evidence of the current balance of a loan. In addition, any other liens or encumbrances, such as tax liens or judgment liens need to be considered. If the debtor isn’t sure whether or not there are other liens on his or her home a title report may be needed.
3. Homestead Exemption. To claim a homestead exemption in New York a debtor needs to reside in his or her home as a primary residence. A single debtor has a homestead exemption of $50,000 of equity and a married couple that holds title jointly has a $100,000 homestead exemption. The homestead exemption is the right to exempt equity in the amount of exemption.
In Part II of this series we will look at how the different strategies that a debtor can use based on these factors.
At Starr & Starr, PLLC we are active in representing debtors in bankruptcy cases and have experience in helping people save their homes in bankruptcy Please feel free to contact us at 888-867-8165 or by e-mail at info@starrandstarr.com to schedule a consultation.