According to that article, a Zillow economist indicated our country has never had this many homes with negative equity through out our country in history.  Apparently, this means even in the great depression, housing never went this far upside down through out our country.

One of the conclusions identified in the article is that these conditions will create more foreclosures due to their affect on the housing market.

According to the article, home prices in Phoenix “dropped more than 52 percent from their peaks through the third quarter of 2009. And as of the fourth quarter of last year, nearly 62 percent of single-family home mortgages were underwater .  .  .  .”

So, it appears things are not getting better anytime soon.  In fact, they may be getting worse as more and more people will find it harder to sell their homes to prevent foreclosure.  Bankruptcy is a tool that may be able to help you stay in your home or properly eliminate the debt and tax burden’s that can arise from a foreclosure sale.  For more information, visit ArizonaBankruptcyGuru.com.

Are My Recreational Vehicles Exempt In Bankruptcy?

It depends. You can file Bankruptcy and keep your recreational vehicles if you are willing and able to pay the Bankruptcy Trustee the current market value of the vehicle (if you own it free and clear) or for any equity in it.  If you cannot afford to pay the Trustee the market value or equity you have in the vehicle then, you will lose your recreational vehicle when you file for Bankruptcy.

Recreational vehicles such as quads, sand-rails, dirt bikes, jet skis, boats and ATVs are non-necessity items. These types of vehicles are not considered necessary to you establishing a fresh start.  Therefore, they are not protected under the bankruptcy exemption statutes.  Consequently, they are subject to being taken in a bankruptcy proceeding if you do not plan for your bankruptcy properly.

In a Chapter 7 Bankruptcy, you generally are not allowed to keep a recreational vehicle.  In a Chapter 7 case, you must either: (1) surrender the recreational vehicle to the Trustee, or (2) buy the recreational vehicle back from the Trustee.  If you surrender the recreational vehicle to the Trustee, the Trustee will sell it and after withholding the administrative expenses of the sale, pay the remaining proceeds to your creditors.  One option you can pursue is to purchase back the asset, typically at a reduced price, from the trustee.  The Trustee will then take your purchase proceeds, less his administrative expenses and pay the creditors.

For example, if you had a quad that was worth $2,500, the Trustee could sell the quad at an auction and perhaps get $2,000 for it.  After subtracting administrative expenses for his efforts, as well as the cost of the sale, the trustee would be able to pay $1700 to the creditors.  Or, you may offer to purchase the quad back from the trustee for $1500 and keep the quad.  The trustee would then pay the $1500 less his administrative expenses to your creditors.

A better way to address the issue with your recreational vehicle would be perhaps to sell it before filing bankruptcy and place the cash proceeds into an exempt asset such as the equity in your home or your primary vehicle.  In this scenario you get to keep the cash, but lose the recreational vehicle.

In a chapter 13 case, you could keep your recreational vehicle.  However, you would have to pay the Trustee back the value of the asset over the life of the Chapter13 plan.  Chapter13 plans last 3 to 5 years.  So, for example, if the quad was worth $2,500, you would pay the trustee roughly $45 per month for five years to keep your quad.  Again, this assumes you own the quad free and clear.

Under either chapter 7 or chapter 13, if you owe money on the quad, you simply have to keep making the payment to keep it.  If you have a substantial amount of equity in the quad, and still owe money on it, you may have to pay the trustee an amount equal to your equity in order to keep the quad, or the trustee may take it and sell it if he believes there is enough equity in it to warrant the sale.  In a chapter 7, if you were going to pay the trustee for the equity, you would have to pay it all in one lump sum.  Whereas, in a Chapter 13, you can pay the value of your equity over time, in monthly payments, over the life of the Chapter 13 plan.

A commonly overlooked benefit of bankruptcy is how it can modify the obligations you owe on your car or auto loans. Bankruptcy provides powerful options to consumers when it comes to car loans.  Bankruptcy can wipe out car loans or reduce the outstanding principal balance.

Many people who come to see me about bankruptcy have not thought about how bankruptcy options for the car loans can improve their situation.  Rarely do they bring this up unless they are in the process of having a vehicle repossessed.  Aside from stopping a repossession, there are other benefits bankruptcy can provide that will ease your auto or car loan financial obligations.

In both chapter 7 and chapter 13 cases, you can return a vehicle to the bank and eliminate 100% of the debt tied to the vehicle.  The bank will not be able to pursue you for any deficiency, ever, period.  This is a good option where you are upside down on your vehicle, meaning you owe more on the automobile than it is worth.

For example, suppose you owe $19,000 on a car that is worth only $8,000.  If you keep the car, you are $11,000 upside down with negative equity and you still have to make car payments.  Under either chapter 7 or chapter 13 bankruptcy, you can give the car back to the bank.  Your loan is eliminated and you get right side up immediately.

Another option would be to simply pay the bank, in one payment, the $8,000 that the car is worth.  You would then be able to keep the car and eliminate the $11,000 negative debt, i.e. the amount you are upside down on the car.   You could either borrow the $8,000 from a friend or relative or get a new loan from a financial institution for the $8,000.  There are financial institutions that specialize in making these types of loans for bankruptcy cases.

Another option that may be available to you under a chapter 13 bankruptcy, depending on how long you have owned the car, is to force the bank to accept the $8,000 for the vehicle and pay that $8,000 off over the life of the bankruptcy plan.  For example, you could end up with a payment as low as $135 per month.