Legal Question in Bankruptcy in Florida

My wife and I are divorcing (no children, short-term marriage) and own 2 properties: house which is our residence and a condo that we rented out (which I am now occupying)

We are both listed on each of the deeds

The house is currently worth $175k, our cost was $200k ($180k acquisition + $20k improvements)

The house has a 1st mortgage of $120k, 2nd mortgage of $20k and a HELOC of $100k (at 2.75% variable APR)

I am the only borrower listed on the HELOC Note

My wife and I are both listed as borrowers on the Notes for the 1st and 2nd mortgages (both at 5.5% fixed)

The condo is currently worth $70k, and the cost was $235k (yes, the value has declined about 70%)

The condo has a 1st mortgage of $170k (at 7.25% fixed, high because it was an investment property)

I am the only borrower listed on the Note for the 1st mortgage

My credit score is currently 775 and I�ve never missed a payment yet, but can�t afford to continue paying the house mortgages going forward

I have a negative net worth of about $300k (-$65k house -$100k condo -$185k student loans +$50k Retirement funds)

My salary enables me to pay the mortgages for one of the properties, but not both

I want to let both properties go into foreclosure

I understand that even after a foreclosure, I will still be liable for repayment of the HELOC

I will probably want to declare bankruptcy to get rid of the HELOC, I know that the student loans are virtually impossible to have discharged

My divorce attorney is unwilling to consider the aforementioned because he feels it is too early. I think it�s never too early to begin to strategize how I�m going to accomplish my goal of starting over with just my student loan debt.

Questions:

Am I correct that I�ll still be responsible for the unpaid amount of the HELOC debt even after foreclosure?

If so, is bankruptcy the least expensive way to eliminate the HELOC debt?

If so, am I correct that there�s no point in trying to do short sales because the BK will destroy my credit score anyway?

What is the likelihood that the divorce judge would order me to not discharge the HELOC through bankruptcy?

Thanks!


Asked on 11/28/09, 2:34 am

1 Answer from Attorneys
Alan Wagner Wagner, McLaughlin & Whittemore P.A.

A divorce judge cannot change the laws of bankruptcy.

After foreclosure, you are responsible for any shortfall -- not just the HELOC.

Go see a bankruptcy lawyer to get good advice about that. Rarely should you get fiancial advice or bankrupcy advice from a divorce attorney. Get a bankruptcy lawyer and let him or her talk to the divorce lawyer.

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Answered on 12/03/09, 9:27 am


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