WHAT is the meaning of the title of this article? Does this imply that Chapter 7 is risky such that Chapter 13 is safer in certain situations?
Yes, that’s exactly what it means. Now that interest rates on mortgages are historically at their lowest and given the shortage of houses in Southern California, the prices of houses here keep on going up.
Just remember this: Chapter 7 trustees have the power to sell your house under certain circumstances. Chapter 13 trustees do not have the power to sell your house under any circumstances. In Chapter 13, the non-exempt portion of your house is used as leverage against you by the trustee to force you into a higher plan payment using the liquidation analysis. But a Chapter 7 trustee can sell your house if there is a viable amount of non-exempt homestead.
Let’s put these in numbers that are easily understood. You have a $600,000 balance on your mortgage owed to the bank. You check with Zillow or Redfin and they say the current market value of your house is $1.2 million. You think it’s all good because the homestead exemption you qualify since your residence is in LA County is $600,000. You believe that the $600,000 is exactly enough to cover your equity of $600,000 because $1.2 million minus $600,000 mortgage balance is $600,000 and you can fully exempt that equity in the Chapter 7 case that you are thinking of filing to get rid of $50,000 of credit cards.
So let’s imagine the likely scenario that will happen. You appear for the 341A hearing and this is what happens. The Chapter 13 trustee asks, “How did you arrive at $1.2 million as the current market value of your house?” You reply, “I got it from Zillow and Redfin.” Then the trustee says, “I think the value may be higher. I think it is $1.3 million. I will send my realtor over to your house tomorrow so he can look at your house and tell me what he thinks the value of your house is.” Your reply “WTF?” If indeed his realtor says it’s worth $1.3 million, then you are now at high risk of losing your house to the Chapter 7 trustee. He will sell your house to the highest offer, likely over $1.3 million, give you $600,000, your homestead exemption, and use the difference to pay your $50,000 of credit cards and pay himself, his realtor and his lawyer. That’s another $50,000. So you lost your house for $50,000 of credit cards. Sure you got $600,000 of cash in your pocket. $600,000 can get you a lot of houses out of state or even in Europe. You can get a golden visa for permanent residency there if you buy a house for 300,000 Euros in Greece, or 500,000 Euros in Spain. This is certainly an interesting option since you are now cash rich but nevertheless homeless. You can even go back to your country of origin and live like royalty because $600,000 of cash is a lot of cash anywhere in the world, except maybe in Hong Kong where you will need more than that to live royally.
The foregoing nightmare scenario cannot happen in Chapter 13, why? Because the Chapter 13 trustee has no power to sell your house. Sure you pay a plan payment whatever that is, paying a portion of the $50,000 over 60 months without interest. But there is zero risk of losing your house. Better to be safe than sorry. In Chapter 13, you might be able to go as low as $150 a month if you can present an appraisal report from a licensed appraiser that says your house’s current market value is $1.2 million. But most Chapter trustees will accept a printout from a Zillow appraisal, which costs you nothing. On the other hand, an appraisal report from a licensed appraiser costs about $250. It’s not a major expense.
What happens when you get into a nightmare scenario with the Chapter 7 trustee putting a for sale sign in your front yard other than letting your rottweilers out to prowl in your front yard?
Here’s the most important thing you have to do, kneel down be humble and sincerely ask God for his help to get your case back on Chapter 13.
In Chapter 6 of the Bible, the prophet Daniel was sentenced by King Darius to die in a den of lions. If you are in chapter 7 and the trustee has now listed your house for sale, you are now in the den of lions. These lions are the chapter 7 trustee(s), his realtor(s), and his lawyer(s). Every action to take will cost you big bucks. Let’s not even get into how much those big bucks can get. You won’t even be able to imagine the figures involved.
To sell your house to get $30,000 to pay your credit cards, it will take $100,000, that’s how absurd it can get. Of course, that will all come out of your house sale proceeds, it’s coming out of your skin.
So Daniel is now in the lions’ den getting ready to be eaten. But lo and behold, our God sends an angel into the lions’ den and closes their mouths!
“Daniel, servant of the living God, has your God, whom you serve continually, been able to rescue you from the lions? Asks king Darius.
“May the king live forever! My God sent his angel, and he shut the mouths of the lions. The have not hurt me, because I was found innocent in his sight. Nor have I ever done any wrong before you, your majesty.”
“I issue a decree that in every part of my kingdom people must fear and reverence the God of Daniel. For He is the living God and He endures forever His kingdom will not be destroyed, His dominion will never end. He rescues and He saves; He performs signs and wonders in the heavens and on the earth. He has rescued Daniel from the power of the lions.”
Look at the incorruptible body of the blessed Carlo Acutis who died at 15 in 2007. You can look at his body in Rome, Italy, now 14 years after his death. He looks like he’s just asleep in his jogging suit and rubber shoes! That is a perfect example of an ongoing sign on earth that the God of Daniel, our God, my God, is almighty and all-powerful that He even suspends the natural laws of biology and physics without any effort. He resurrected His one and only beloved son from death on the cross. He has power over death.
I have actually thought, “What would the other religions believe if they actually saw the incorruptible body of the blessed Carlo Acutis? I think even Buddha, if he were alive today, would truly believe that Yahweh is the one True God.” No need to think about reincarnation and nirvana because his incorruptible body is available for all to see in Rome, Italy. We won’t need any kind of explanation on the efficacy of modern-day mummification. Come on, man, that’s all bull. The truth is in plain sight. Believe your own eyes, that the one true God is all-powerful and His name is Yahweh, “I am who am.”
If you need debt relief, set an appointment to see me. I will analyze your case personally.
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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.
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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
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