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Considering bankruptcy - need sincere advice

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    Considering bankruptcy - need sincere advice

    Greetings,

    My father is in a difficult financial situation and I am hoping I can get some sincere advice to help guide him in the right direction. Because I am not a financial expert and a lot of this is new to me also, I ask for your patience with my lack of real estate/financial vocabulary and with my possibly obvious final questions...

    First some background: both my parents have always had excellent credit. This allowed them to jointly buy our current home more than 15 years ago. About 4 years ago, my parents decided to open an equity line that would allow them to make an emergency loan to some relatives (~$55,000). Our relatives have paid down only about ~$15,000 (leaving their current bal: $40,000).

    A year or so after that, my dad agreed to help my younger sister buy a house. The house was paid for with an "80/20" loan, which meant that my dad used two personal loans (loan A = $248,000 and loan B = $42,000). Unfortunately, my sister and her partner separated and the house could no longer be paid for. My dad tried to cover the mortgage payments for the house by using money from the equity line. After $20,000, he gave in and the bank that lent the larger loan (A) claimed the house.

    A little over a year ago, my father also had to deal with a tremendous pay cut (current monthly pay now ~$1080, mom's mo. pay ~$1000/mo, total = ~$2000). So, he again started to rely on equity money to pay our current home's mortgage ($1200/mo) and other utility bills. This has brought the total balance in the equity line to $85,000.

    A couple of months ago my dad started receiving calls about the smaller $42,000 loan (B) that he used for my sister's house. It is not clear to me whether these are collection calls or whether it's the bank. Either way, the callers were claiming that he now owed $72,000. My dad realizes that there is no way that he can ever pay back Loan B, especially with all the other dimensions of his financial situation.

    Financial Summary:
    Current Home Value: 212,000
    Equity Line Credit: 124,000
    Equity Line Credit Used: 85,000
    Personal Loan B (sisters foreclosed house) = 42,000 (caller said he now owes ~72,000)
    Utilities/mo: ~800 - 1,000
    Food & other living expenses/mo (mom): ~500 - 600
    Medical bills (mom)
    No Credit Card debt

    As you can see, my father now finds himself in a 'vortex of extinction' situation where he is quickly digging himself into further financial ruin. It is obvious that he has made some really poor financial decisions, but as his daughter I do not feel I am in any position to judge my father. I think it is more beneficial to try and help him by finding some type of financial counsel. I thought that posing my fatherís questions on this forum would be a good place to start. So thank you for any insight ahead of time.

    1.) Is it possible that our family can lose our current home in case of a lawsuit by the bank that lent my dad the 2nd smaller loan (B)? (***Loan B is only in my dad's name, ***our home is in both my mom and dad's name)

    2.) In order to avoid losing our current home, would it be beneficial for my dad to remove his name from the house title?

    3.) My dad is considering filing for bankruptcy in order to be rid of Loan B, a loan which he will probably never be able to pay. Is this recommendable?

    4.) I was reading a couple of posts from other members and I noticed some wrote about SOL's and how sometimes people just wait for the SOL to expire?or something? (seems risky) Is this something that would apply to my dad's personal loan? How can I find more information on this?

    5.) What are some nonprofit organizations or credit counselors that might be able to help guide us in the right direction?

    Thank you for taking the time to read this...I hope to hear back soon....

    #2
    Is there an 1st mortgage on the existing home, if so, how much?

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      #3
      If the home is 1st mortgage free that would mean that it is an 212k asset with 85k debt to an 2nd. If so, Why not sell or offer note B an lower settlement out of the line of credit? You could likely get an settlement for the 42k or maybe a little less.

      This would leave them with an home loan of 120k to 124k.

      I would also tighten the screws on the relatives who still owe 40k.

      Comment

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