Legal Question in Bankruptcy in California

Bankruptcy effect on reverse mort.

I am in my mid-70's. I did a reverse mortgage for the full value of my home about 5 years ago. Now, of course, the house is worth about half the amount as when I did the reverse mortgage, I lost my job due to a disability several months ago, and have now accumulated about $30,000 in credit card debt and have no hope of repaying it. I see no way out but to declare bankruptcy, but need to know what that will do to my reverse mortgage. Will I lose my house and be out on the street?


Asked on 3/22/09, 10:26 pm

2 Answers from Attorneys
David Gibbs The Gibbs Law Firm, APC

Re: Bankruptcy effect on reverse mort.

There is no reason that you have to lose your home in Bankruptcy. As I understand reverse mortgages (and I do not profess to be an expert on them) you make no mortgage payments. In theory, you may have no equity left in the property due to declines in the real estate market, so it is very likely not an asset that can be sold by the Trustee. You need to review your specifics with a bankruptcy attorney on that issue. Finally, since there are no payments due on your mortgage, you would not be in default with the mortgage lender. I would suggest that you contact a local, qualified bankruptcy attorney to review the details, but I don't believe they can foreclose and take your home based solely on the bankruptcy.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.

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Answered on 3/23/09, 2:19 pm
Gary Fraley California Bankruptcy Attorneys

Re: Bankruptcy effect on reverse mort.

I am Gary Fraley, founder of Fraley & Fraley, California Bankruptcy Attorneys, located in Sacramento CA. I have been in practice for 31+ years and am a State Bar Certified Bankruptcy Specialist. You may be in a unique position because you may have no equity but have a cash flow. The exemption for your home is $150,000 of equity. Your home would be at risk ONLY IF YOU HAD MORE THAN $150,000 IN EQUITY. The real question is which of 2 different exemption systems will be best for you. If you use the wrong system you could lose your vehicles, tax refund, bank accounts and other assets. You need a competent bankruptcy attorney to determine what is the best system and to help you with pre-bankruptcy planning. --Gary Fraley

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Answered on 4/18/09, 1:33 pm


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