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Protecting assets

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Beav

Junior Member
What is the name of your state (only U.S. law)? NY and Oregon

I have two houses in Oregon and one in NY. The NY home has a mortgage with Chase bank. They won't take it back and they won't offer me a loan modification. If I bankrupt to discharge the debt (NY is an investment property, way underwater, I owe about $160,000, it's worth about $80-90,000, taxes & insurance $6800/year, expensive repairs, don't think I can rent it high enough to even cover my payments).

I understand that in NY the bank can foreclose on you and then sue you for whatever you owe still. Chase bank seems to be especially greedy about this, refusing to sign release of liability or whatever it's called that releases you from the amount you are in arrears.

How can I protect my Oregon properties? Would it be illegal to transfer the Oregon properties to a family member in case I have to bankrupt sometime in the future to get rid of the NY house?
 


cosine

Senior Member
Why should they release you from what you owe? That's like giving up. Maybe they can collect it or maybe they can't. Yes, they can foreclose. Yes, they can do a short sale on the property that gets applied to what you owe them. You still owe the remaining debt balance.

Imagine yourself in the position of creditor holding the mortgage and the lien on the property. What would you do?

The big complication in all this is that before a few years ago it was common that after a foreclosure and short sale, the mortgage would have been paid off and you get the balance of the sale. Right now, banks are afraid of the short sales. They are afraid they won't be able to collect on what is left of the mortgage. They also don't want to have to pay taxes on the property in the interim (since they may be trying to delay the sale, hoping the values go back up). They prefer to leave you stuck with it. And you can't sell it unless you can get enough to pay off the mortgage (unlikely for now) or can find a buyer willing (and OK by the bank) to assume the mortgage (and you know you wouldn't do that even if you had money).

Basically, the property is unsellable. I think you have figured this out.

If you are thinking bankruptcy, it might be better for you to go ahead and do it now. You need to figure out if bankruptcy will allow you to keep your OR house and surrender the NY property as part of the creditor distribution. But transferring it to someone else without proof of them paying you what it is worth would subject it to a "take back" in the BK court (more likely the closer the two events are in time).

I wouldn't take it (the NY property).

Put the OR house up for sale and see what offers you get. Do you have a relative that can match the highest offer (which, if you get enough of them in writing from people you don't know, can help establish a current market value, making the transfer legit as long as you actually get the cash) and turn around and rent it to you (cannot be a condition of the sale)?
 

bigun

Senior Member
Bigun's rule #1-never involve family or friends in your bk.
Do not transfer any property on the cusp of bk unless your lawyer says it's OK.
You've 2 houses in Oregon. How much equity in each? What is your income {above or below the median for Oregon}. Have you lived in Orgeon for 2 years or more in order to use Oregon's exemptions?
Most bk lawyers give free or lowcost initial consultations. Speak with a few and see what they say.
 

bigun

Senior Member
Nobody on this site is going to help you commit bk fraud and that's pretty much what your post is driving at.
Do not under any circumstances get family or friends involved in this.
You will be required to disclose property transfers to insiders going back 2 years. If the transfers left you insolvent the bk trustee has the authority to sue you and your family member under your states Fraudulent Transfer Act and the statue of limitations there may well be far longer than 2 years.
The 2 years I refered to in my previous post is the length of time you have to be an Oregon resident to use OR.'s bankruptcy exemptions.

I'll say again-get yourself to a lawyer. You need someone that is an expert in asset protection.
Depending on your income and the amount that may be owed on a deficiency balance a Chapter 13 filing may work if the goal is to keep the Or. properties.
 

bigun

Senior Member
You need to understand something here.
The trustee represents the interests of your creditors. They don't care about your reasons for structuring a sale to an insider. All they see is a piece of property that could be sold to repay an unsecured creditor and they'll sell it at below mkt prices just like you could.
Just do yourself and everyone involved a favor and get yourself to an attorney.
 

tranquility

Senior Member
Quite frankly, if you feel you are gaining advantage from the transaction, you should worry about fraudulent transfer. If it is or not depends on all the facts and you should seek competent council.
 

bigun

Senior Member
If it is or not depends on all the facts and you should seek competent council.
Exactly!
Nothing wrong with trying to keep your property. Sometimes though, bk isn't the right vechicle.
Good asset protection lawyers will tell you upfront that, "we don't do asset protection. We do tax planning, retirement plannimg and, estate planning". All of those areas also have asset protection features.
What you want to achieve may well be doable without involving others.
 

Beav

Junior Member
I want to try to pay for the underwater house until the market changes

My post isn't driving at what you said above, it's asking for legal ways to afford to pay my bills without letting the bank cheat me by offering a loan modification, telling me to reapply over and over when my application expires, and then never giving me the loan modification after all.

Sounds like the best thing to do would be to sell the properties with equity in order to pay for the NY house and to avoid having to bankrupt. From your advice, it seems like a sale to a relative would be legal and ethical since it gives these advantages: 1) Keeps me solvent so I can pay for the NY house and avoid bankruptcy, 2) Avoids costly real estate agent listing and selling fees, 3) Gives me quick access to cash without waiting for realtors to list, show and sell, and 4) Gives me a dependable buyer who won't back out last minute after making an offer.

I don't want to ever bankrupt, so I'm going to take this route in order to be able to pay my bills and take care of my responsibilities.
 

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