Legal Question in Bankruptcy in United States

It is not possible to answer these types of questions over the internet. I strongly suggest you refer your client to a bankruptcy attorney and not attempt to advise them.

Yes, you are at risk for being accused of giving legal advice to your client, which you are not authorized to do, unless you're a lawyer, and probably a criminal offense in North Carolina, as it is in Illinois. And the property does in fact have a first lien. The $550,000 line of credit is the first lien. And yes, a bankruptcy may buy your client time, and delay the sale. But that's probably the only protection a bankruptcy will provide. Instead of trying to parrot back this to your client, do the right thing. Tell your client you're not a lawyer, can't give legal advice, and advise them to consult a lawyer. There are a lot of us, and your client's situation is not at all uncommon to us.

Bankruptcy will stop the foreclosure sale. The problem is a Chapter 7 bk under the scenario you mentioned is a terrible idea as the Chapter 7 Trustee will sell the house.

A Chapter 11 or 13 might be the correct choice but it really depends on why they are in the situation they are in. We regularly will file a Chapter 13 or 11 to prevent the foreclosure sale and either try to obtain a loan mod on the home or, if that is not an option, to cure arrears over time. There are MANY other options but it is too complicated to discuss over the internet.

I also agree with everyone else. If you are not an attorney, you cannot be giving legal advice.

Is the line of credit secured by the house? Which state does your client reside in (for bankruptcy exemption analysis purposes) and is it the same state as the location of the house? The best path for your client is to immediately seek advice from a reputable consumer (Ch 7 and Ch 13) bankruptcy attorney.

Yes. A Bankruptcy will stop the sale of the property. However, your client does have a first lien on the property, it is the line of credit. The bankruptcy will protect him from the foreclosure sale, but for a limited time. BTW - In Florida, trustees do not sell homes at the auction. In any bankruptcy, so long as you pay for the home, you can keep it. Like everyone has advised, you should associate yourself with a bankruptcy attorney because it sounds like you may get yourself all jammed up. Good luck.Feel free to call me to discuss the issues. Eric Klein 561-353-2800 X306.

I agree, you should not be giving this kind of advice to your client, unless you are an attorney. If you are not, you should be directing them to an attorney, preferably a bankruptcy attorney who can discuss the Chapter 13 and 11 options, advantages and pitfalls.