Parents own their home outright (valued at about $116,000), they owe about $55,000 in credit card debt. They were told that they couldn't fi...

Question

Parents own their home outright (valued at about $116,000), they owe about $55,000 in credit card debt. They were told that they couldn't file chapter 7, but would have to file chapter 13...is that right? I know they are allowed $40,000 equity due to the Utah Homestead Act, but would they be forced to sell home to pay off creditors if they did a Chapter 7?

Answer

Here is the problem.

116,000

-40,000

= 76,000 in available equity that should go to creditors.

In Ch 13 they would not need to sell the house, but their excess income above a court approved budget for 3 years would be applied to their unsecured debt - and they keep the house.