Treasury Offset/Tax Refund

What is the name of your state? California



Eight years ago my husband was going through a divorce with his now ex wife. He took over one car (now paid off) and she took the other car ($9,000 loan deficiency) and their house (1st mort. 140,000 2nd mort. 34,000 at the time of divorce). She continued to make the regular payments on the house until late 1997 when she allowed the house to be foreclosed upon. The decree ordered her to refinance the house in her name only, but she never did. She allowed the car to be repo'd two months after the divorce was final. She has since filed Ch. 7 and the 2nd on the house was never satisfied when the house was auctioned off. The deficiency is now $49,000 after our paying $300 a month for the past two years. There seems to be no end in sight for this loan. Four months ago my husband had to travel for work and the Treasury Department seized his travel funds to apply to this deficiency. ($1,680) Besides this $49,000 debt we have $18,000 in credit card debt and a car that is approx. 7k upside-down.
If we file for Ch. 7 will this Treasury Offset debt be discharged. The house was sold in late '98 so it is no longer a secured debt (?) Also, would the deficiency on the 9k loan (her vol. repo'd car) be dischargeable?

We are expecting a good sized (3,500) California State tax refund, will the refund be affected if we file prior to the refund?

[Ladynred]

Which debt is the Treasury siezing money for ?? I didn' t know they could sieze re-imbursable funds that way.

Anyway, ALL the unsecured debt would be wiped out with a CH 7 Bk, including the old repo deficiency. I'm assuming that the 49K for the now-unsecured house loan would be too.

You could keep your car if you wanted to by either reaffirming it or including it and continuing payments. If you include it, and you decide later you don't want to keep it, you can give it back to the bank with no liability at all.

Thank you for your prompt reply, Ladynred

Sorry I wasn't terribly clear on that! The seized monies went toward the Treasury Offset from the deficiency on the 2nd mortgage. HUD (Albany office) now has the debt after being sold around to six different collection agencies.

We haven't been contacted about the car, but when we checked our credit last year we saw there was a judgement on my husbands credit for the 9k car deficiency. We were not served papers for that lawsuit.

Our current car (7k upside down) we would probably turn in and only have one car ('83 mercedes wagon) until all was discharged. From what I've read the value of that vehicle would fall under the vehicle exemptions. Is that correct?

I'm still unclear on our California State Refund though.

[Ladynred]

The state refund, if as much as you think, would probably end up going to the Trustee if you file and will get the refund after you've filed and before your dishcarge. If you get it BEFORE you file, and you spend it on necessities (and can show that), then its yours. If the refund comes well after your discharge, the likelihood of the Trustee taking it would be far less.

Okay I spent all of today reading up on Ch. 7 and locating a BK attorney locally. This is what we were told so far and I'm just looking for opinions if he knows what he is talking about. First off he wants $750 for his fee plus $200 in filing fees. From what I've read this is reasonable, yes?

Treasury offset for the 2nd mortgage deficiency is now $49,186.22 as of today. He says it may not be dischargeable because it is held now by HUD and could be considered a Federal Debt. Does anyone know about this? If it is not dischargeable I'm having doubts about filing as everything else of ours is current right now.

Deficiency on ex wife's car - 9k judgment - is dischargeable

18,000 in our credit card debt (ortho x 3, dental bills, furniture, computer, misc) would be dischargeable. However, we purchased a laptop computer through Best Buy (household bank) last April, will they ask for the computer back? Attny said that would be covered at the 341 hearing.

Current car loan which is 7k upside down would be able to be discharged after we turn in the car, which we would do.

Our house was purchased a year ago, October, and according to a recent (90 days ago) appraisal we only have 3,500 of equity. Attny didn't know for sure if we could reaffirm this or not because of the amount of equity.

Sorry this is so long!
My 3 main questions
1. Is this Treasury Offset really dischargeable? The debt is impacting my husbands job (he can't travel with them seizing his travel funds) and if it is not dischargeable we will just try to make a settlement agreement with HUD.
2. Will Best Buy (Household) ask for the laptop back? I've heard horror stories about Best Buy repo'ing computer stuff in Ch. 7 situations.
3. Will we be able to keep the house? We are current on the payments and have never been more than 10 days late (20 day grace) in the past 15 months.
Thank you in advance!