As if the cost of housing in Sacramento California is not already high enough. In an article published in the Sacramento Bee, due to low inventory, median sale price of a home in Sacramento, El Dorado and Placer counties, CA in August 2016 was $345,000, up 11 percent from a median of $311,000 in August 2015.
Sacramento counties includes cities from Elk Grove to Folsom, Citrus Heights, Carmichael, Fair Oaks, and Orangevale, CA.
Placer counties includes cities like Roseville, Rocklin, Auburn, and Nicolaus, CA.
What does this mean to potential Chapter 7 and 13 Bankruptcy filers?
If you have a second mortgage or home equity line of credit on your home that you want to remove (aka “lien strip”), raising home prices will likely defeat your chances. The current market value of your home must be less than the balance owed on the first mortgage or senior deed of trust in order for you to file a motion with the bankruptcy court requesting a lien strip of the second mortgage or home equity line of credit (aka “junior liens”). Chapter 13 lien strip is “all or nothing” if you are applying it to your residence. It is a different story regarding rentals, investment property or other nonresidential real estate.
Moreover, raising home values can limit how much you can remove and eliminate judgment lien (aka judicial lien) from you home. You can only avoid judgment lien from your home or other real estate to the extend it impairs the California exemption. If the California exemption covers all of the equity in your home, then you can avoid all of the judgment lien. However, the greater the amount that your home equity exceeds the amount of equity protected by the California exemption, the less the judgment lien can be avoided from your home through Chapter 7 or 13 Bankruptcy lien avoidance pursuant to 11 USC § 522. This not all or nothing like Chapter 13 lien strip.
This can also means whether you can safely file for Chapter 7 Bankruptcy and keep your home. If you have more equity in your home than what the California exemption will protect, filing a Chapter 7 Bankruptcy can mean liquidation or sale of your home. You are then left with a Chapter 13 Bankruptcy unless the amount of debts exceeds the debt ceiling for qualifying for Chapter 13 Bankruptcy. Or the amount of equity in excess of the California exemption is so high that you cannot afford your Chapter 13 Bankruptcy Plan payment. Then you are stuck in dealing with your creditors outside of Chapter 7 or 13 Bankruptcy protection.
Lesson: Procrastination should be avoided. As delay will only limit your option. You should consult Muoi Chea, experienced Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA to discuss your options before it disappears. We accept clients from surrounding cities like Tracy, Woodland, Davis, Yuba, Roseville, CA, etc.