Need advice on how to retire with two underwater properties

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FinalSign
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Need advice on how to retire with two underwater properties

Post by FinalSign »

My inlaws are in a bad place financially and I'm having a hard time finding good advice on how they should proceed.

They have made many poor financial decisions and we've tried to counsel them for the past 15 years (once we realized what was going on) and they have been very resistant to our help.

They are finally retired, only income is social security. FIL was working but the pandemic closed that door for him it seems. They have zero saved for retirement. They have 42k dept on a handful of credit cards. They have a home that is fully mortgaged plus about 50k HEL on top of that. They might be able to sell the house for the value of the mortgate, but not the mortgage and HEL. They also own a business office that is currently listed with a relator but won't sell for the value of the mortgage and wont rent out. The town they are in is small and not doing very well so not a great place to try and unload property of any kind.

They could live (and eventually pay off credit cards) on their social security if they downsized their home and sold the business property but they can't seem to get rid of either one without having to lose money on the sell, but they have no money to contribute. No assets to sell other than the over mortgaged property.

I assume they have to either do a short sell, foreclosure, or file for bankruptcy but this is where my knowledge ends. We got them to go talk to a bankruptcy lawyer hoping that person could advise them, but all the lawyer said was "sure I'll file the bankruptcy paperwork just tell me when".

Where could they go to get solid advice on how to best get out from under these underwater properties? Do they need to find a better lawyer? What type? Do they go talk to the bank? Lower interest rates and lower monthly payments aren't going to cut it, they need to move.

Thanks in advance!
bloom2708
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Re: Need advice on how to retire with two underwater properties

Post by bloom2708 »

Bankruptcy is a last resort, but if they have no sellable assets, it seems the likely course. A short sale with a judgement for the balance will also likely result in bankruptcy.

The credit card debt doesn't seem likely to be paid in any scenario.

They could work with the mortgage/HELOC holders and state they simply want to go into foreclosure and turn over the properties. They might get hit with a judgment for any deficiencies when the properties are sold. Do they want to "short sell" themselves or have the bank short sell?

You don't state their ages, but can either work part time?

Can they rent something and live off SS only? If not, one or both will need to figure out some type of work.

Tough situation. No good options when in this kind of scenario.
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123
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Re: Need advice on how to retire with two underwater properties

Post by 123 »

I would suspect that the interest rates they pay on the mortgages are high and they are unable to refinance to lower rates because of existing indebtedness and (due to COVID) diminished income.

OP didn't mention vehicles but I wouldn't be surprised if there were similar issues there.

Bankruptcy might be their best option. With the properties gotten rid of their best housing option might be some subsidized public housing somewhere (might be in another state). With their history of likely borrowing on any equity they happen to acquire home ownership doesn't seem a stable option for them.
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Silk McCue
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Re: Need advice on how to retire with two underwater properties

Post by Silk McCue »

At some point they are going to need to get jobs I expect. Sorry they find themselves in this position.

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Mike Scott
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Re: Need advice on how to retire with two underwater properties

Post by Mike Scott »

Other than some magical infusion of cash; it sounds like bankruptcy or foreclosure are inevitable. Bankruptcy might be more proactive than waiting for foreclosure but both have the positive benefit of cutting off any further access to credit for a while. Get them into a rental and on a budget that their SS will cover. They could work if able. There may be subsidized housing and energy assistance. What do they do for transportation and health care? It's a tough situation but it's also where many people end up and they make it work.
cbs2002
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Re: Need advice on how to retire with two underwater properties

Post by cbs2002 »

Provide more details with asset values, age and income and you may get better advice.

That said, the reason you are having a hard time getting good advice may be that there are no options other than standing pat and servicing the debt, or going bankrupt. I don't see an "out from under".
fortunefavored
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Re: Need advice on how to retire with two underwater properties

Post by fortunefavored »

Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
PVW
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Re: Need advice on how to retire with two underwater properties

Post by PVW »

If you haven't been successful in helping them in the past, why do you think you'll be successful now?

The situation you describe is not sustainable, so something will happen. If your in laws do nothing, then something will happen to them. If they are proactive, maybe they can come out the other end with a budget and lifestyle they can live with.

Given your conclusion that they could live on their income if they didn't have the mortgages, they should find out if the mortgages are recourse loans. If not, then it's legal for them to walk away from the collateral and stop paying the mortgages without the bank suing for the balance of the loans. Then your in laws can find another living situation that fits their budget.
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djpeteski
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Re: Need advice on how to retire with two underwater properties

Post by djpeteski »

FinalSign wrote: Mon Jul 19, 2021 11:09 am They have made many poor financial decisions and we've tried to counsel them for the past 15 years (once we realized what was going on) and they have been very resistant to our help.
It is sad, but your responsibility has long since ended.

The answer is, to go back to work until they can actually retire.
exodusNH
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Re: Need advice on how to retire with two underwater properties

Post by exodusNH »

FinalSign wrote: Mon Jul 19, 2021 11:09 am Where could they go to get solid advice on how to best get out from under these underwater properties? Do they need to find a better lawyer? What type? Do they go talk to the bank? Lower interest rates and lower monthly payments aren't going to cut it, they need to move.
They need to find a bankruptcy lawyer who will lay out their options and explain the pros and cons from each.

It's better to be proactive here, because once they find themselves in the middle of foreclosures, finding housing is going to be difficult.
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JoeRetire
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Re: Need advice on how to retire with two underwater properties

Post by JoeRetire »

FinalSign wrote: Mon Jul 19, 2021 11:09 amThey could live (and eventually pay off credit cards) on their social security if they downsized their home and sold the business property but they can't seem to get rid of either one without having to lose money on the sell, but they have no money to contribute. No assets to sell other than the over mortgaged property.
They should go back to work and keep working until they accumulate the amount they are "underwater".

But if you have already tried (for 15 years!) to get them to change, it's unlikely they would start listening now, unless you tell them what they want to hear. Perhaps they want to hear that you will pay off their debts for them? Maybe they should come and live with you?
Just remember: it's not a lie if you believe it.
neverpanic
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Re: Need advice on how to retire with two underwater properties

Post by neverpanic »

FinalSign wrote: Mon Jul 19, 2021 11:09 am My inlaws are in a bad place financially and I'm having a hard time finding good advice on how they should proceed.

They have made many poor financial decisions and we've tried to counsel them for the past 15 years (once we realized what was going on) and they have been very resistant to our help.

They are finally retired, only income is social security. FIL was working but the pandemic closed that door for him it seems. They have zero saved for retirement. They have 42k dept on a handful of credit cards. They have a home that is fully mortgaged plus about 50k HEL on top of that. They might be able to sell the house for the value of the mortgate, but not the mortgage and HEL. They also own a business office that is currently listed with a relator but won't sell for the value of the mortgage and wont rent out. The town they are in is small and not doing very well so not a great place to try and unload property of any kind.

They could live (and eventually pay off credit cards) on their social security if they downsized their home and sold the business property but they can't seem to get rid of either one without having to lose money on the sell, but they have no money to contribute. No assets to sell other than the over mortgaged property.

I assume they have to either do a short sell, foreclosure, or file for bankruptcy but this is where my knowledge ends. We got them to go talk to a bankruptcy lawyer hoping that person could advise them, but all the lawyer said was "sure I'll file the bankruptcy paperwork just tell me when".

Where could they go to get solid advice on how to best get out from under these underwater properties? Do they need to find a better lawyer? What type? Do they go talk to the bank? Lower interest rates and lower monthly payments aren't going to cut it, they need to move.

Thanks in advance!
1) Recourse/non-recourse and foreclosure logistics are state-dependent. Where do your in-laws live?

2) And more importantly, why aren't they working? Are they unable? Is the local job market completely depressed? In a small town, I'm going to assume gig work like driving for Uber would be out.

3) Relationship and legal questions are supposed to be outside the scope of the forum, but it's widely demonstrated that financial, relationship, and legal issues get entangled all the time. In your case, your in-laws' lifetime of financial recklessness has caused a legal problem for them and may result in a relationship problem for you. I'm not a therapist, just a concerned outsider, but I'd encourage you to get ahead on that part.

4) As you describe their situation, there's a better than 50% chance that the in-laws want some sort of bailout, from someone, and they don't care from whom.

5) Your wife is your partner. Together, you need to define what your allowances and boundaries will be and they've got to be firm. Are there other siblings? If so, once you and DW have a plan and fallback option(s), get the other children in on the conversation. That may complicate matters, but your and your wife's concern is your family. There is no moral obligation to provide for parents who made so little effort to provide for themselves. It's not a case of Dad suffering a TBI the week after his company-sponsored health plan expired and prior to having new coverage in effect.

6) Bankruptcy is possible, but if they've got the ability to walk away and move into affordable housing, that would probably be better and surely less hassle.

7) They can make the minimum payments on the cc debt until they die.
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quantAndHold
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Re: Need advice on how to retire with two underwater properties

Post by quantAndHold »

So I’m guessing the best path forward is a combination of bankruptcy and foreclosure, combined with moving into a place that they can afford with just their Social Security.

Are the properties sellable at all, even as a short sale? Or should they just be trying to negotiate handing over the keys to the lender?
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Carefreeap
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Re: Need advice on how to retire with two underwater properties

Post by Carefreeap »

fortunefavored wrote: Mon Jul 19, 2021 2:43 pm Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
+1

I also experienced something similar with my parents who wound up filing BK at ages 58 & 60 and then divorced after 37 years of marriage. As much as you want them to they aren't going to change. DH and I came within a couple of months of having to support each of them.

Agree with the therapy. Situations like this can wreck your marriage.
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Olemiss540
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Re: Need advice on how to retire with two underwater properties

Post by Olemiss540 »

This is a fantastic market to be job searching in......
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Re: Need advice on how to retire with two underwater properties

Post by Jack FFR1846 »

How old are they?

Looking into bankruptcy is probably a solid bit of advice. They have no money, no assets, owe money and are not working. This isn't a matter of investing here or there, it's a matter of lack of income and savings.

We don't know where they live, so perhaps your assessment is correct that there are no jobs. Near me, you can't walk across the street without seeing help wanted signs or hearing help wanted ads on the radio. Is it really that there are no jobs or is it that they won't accept that they have to do "those" jobs?

I have joked for years on bad days that I'm just going to work for Home Depot. Well, my son was fed up with his job and walked into Home Depot this morning. He walked out with a job and starts Saturday. Is there a Home Depot, Lowes, super market near them? They're all hurting for workers.
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

Can you post their "figures" in round numbers?
What do they each get from SS? ANY other income?
What do they have in the bank? (Yes, there might be something there even with the debts.)

Sounds like they had a "cheap bankruptcy attorney"; they can't typically get paid much in situations like this. The two of you might consider hiring someone reasonably good, including in the "COUNSELOR at law" category. Someone who can as gently as possible (not very, but at least a bit) take a bit of time to explain the choices to them: Bankruptcy, which will allow a future of ______ ; OR _____ (perhaps getting literally kicked out on the street when any options they might have now are gone, or ??).

And yes, see a therapist for the two of you. Parents are *not* going to wake up next weeks and say,"OH, you are right, what should we do!? And thanks so much!!" :annoyed

Are they old enough for any elderly assistance? Poor enough (once this all ends, etc.) for any services or supplements? Subsidized rent?

Try not to start a runaway treadmill of help by offering money for any ongoing expense. Maybe the attorney more than once. Maybe X sessions with a specialist therapist or social worker? If you bail them out in the process, it's unlikely they'll follow through, but again, this is for the two of you to discuss and with a professional, etc.

Are there other family members they might turn to openly or behind your back? That would only slow things down if "everyone else" isn't on the same page.

Again, if you post actual/approximate figures/values/etc., there may be more thoughts here.
Unfortunately, you are not alone with this problem...

Try *very* hard to avoid letting this create any permanent damage to your marriage.

Good luck to all of you.

RM
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Normchad
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Re: Need advice on how to retire with two underwater properties

Post by Normchad »

They should head straight for bankruptcy. It’s basically inevitable, and it would be a shame for them to waste any remaining resources trying to avoid it.
J295
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Re: Need advice on how to retire with two underwater properties

Post by J295 »

Locate a quality experienced debtor side personal bankruptcy attorney. Should explore Chapters7 and 13 and in any case get counsel on income tax consequences (forgiveness of indebtedness income rules).
grkmec
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Re: Need advice on how to retire with two underwater properties

Post by grkmec »

Do they even want your help? Or do they just want you to bail them out m?
Somethingwitty92912
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Re: Need advice on how to retire with two underwater properties

Post by Somethingwitty92912 »

Maybe reverse mortgage both properties? I don’t even know if those are scams, but prior to bankruptcy I’d look into it.
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

Somethingwitty92912 wrote: Mon Jul 19, 2021 6:28 pm Maybe reverse mortgage both properties? I don’t even know if those are scams, but prior to bankruptcy I’d look into it.
Looks like they are fully mortgaged or maybe even underwater already.

Anything other than bankruptcy sooner rather than latar is, in my non-expert opinion, likely to prolong the agony and worse, possibly leave them with fewer resources/choices later.

RM
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FinalSign
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Re: Need advice on how to retire with two underwater properties

Post by FinalSign »

Thanks for replys!

They are around 75 years old. They live in KY. FIL was a family practice doc but he's at the end of his career. He shut his solo practice down last year due to pandemic and just didn't reopen. He's struggled to keep up with current medical knowledge already and continuing to work in his field is probably not a wise choice. He was doing some part time work that recently dried up so their financial situation is now an issue. Working as a walmart greater isn't going to do much to help them get away from these properties.

They get $3700/mo from social security combined but their expenses are $5800. The biggest chunk of their expenses are due to the 2 mortgages and HEL plus upkeep on the properties. The home is older and isn't in the best shape but not a total loss yet. They have around $425-$450k in loans on the two properties and $42k credit card debt. One car is almost paid off. Maybe 10k in the bank and zero other assets besides what is in the house (cloths/furniture).

My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the inlaws want the kids to bail them out, but nobody is willing to do that. I think it will take maybe $75k-100k to get them out from under the loans but its hard to get a good estimate.

If they can just get away from the properties they can live on their SoS. One question I do have is would any of these options (bankruptcy/foreclosure) end up with their SoS checks being garnished?
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FinalSign
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Re: Need advice on how to retire with two underwater properties

Post by FinalSign »

Normchad wrote: Mon Jul 19, 2021 6:18 pm They should head straight for bankruptcy. It’s basically inevitable, and it would be a shame for them to waste any remaining resources trying to avoid it.
This is the main reason none of the children are bailing them out. Everybody is afraid the eventual result will be bankruptcy no matter how much "help" they get so it would be a waste if true.
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cchrissyy
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Re: Need advice on how to retire with two underwater properties

Post by cchrissyy »

I'm sorry about the situation!

Bankruptcy probably is inevitable but that doesn't mean there is any reason to hurry it along. They've been living in debt a long time already so what I mean is, unless creditors are calling all the time and scaring them, it's ok if you guys take this slowly. I suggest the top priority right now is applying for senior housing, something on a sliding scale for their income, because they need to move out of their current house and I know those programs can have a long wait-list so I think you should get started on that right away.
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Re: Need advice on how to retire with two underwater properties

Post by SteadyOne »

fortunefavored wrote: Mon Jul 19, 2021 2:43 pm Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
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RickBoglehead
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Re: Need advice on how to retire with two underwater properties

Post by RickBoglehead »

Smart children.
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

cchrissyy wrote: Mon Jul 19, 2021 6:50 pm I'm sorry about the situation!

Bankruptcy probably is inevitable but that doesn't mean there is any reason to hurry it along. They've been living in debt a long time already so what I mean is, unless creditors are calling all the time and scaring them, it's ok if you guys take this slowly. I suggest the top priority right now is applying for senior housing, something on a sliding scale for their income, because they need to move out of their current house and I know those programs can have a long wait-list so I think you should get started on that right away.
There might indeed be a reason to "hurry it along".
In some cases (might be jurisdiction dependent as well as personal circumstances dependent), the person(s) filing for bankruptcy might be allowed to keep *some* of their resources. if they've already spent that final small amount, then... that's gone and can't be saved/rescued.

RM
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Normchad
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Re: Need advice on how to retire with two underwater properties

Post by Normchad »

FinalSign wrote: Mon Jul 19, 2021 6:45 pm
Normchad wrote: Mon Jul 19, 2021 6:18 pm They should head straight for bankruptcy. It’s basically inevitable, and it would be a shame for them to waste any remaining resources trying to avoid it.
This is the main reason none of the children are bailing them out. Everybody is afraid the eventual result will be bankruptcy no matter how much "help" they get so it would be a waste if true.
Good on you and your siblings. Saving your resources to possibly help them later is a good idea.

There is a lot of moralizing and judgement surrounding bankruptcy. Honestly though, they are already bankrupt. They can’t meet these commitments.

Bankruptcy exists for situations like this.

The best thing for your parents would be to get a fresh start. They’ll stay in their house. They’ll have their SS. And they’ll be out from under this burden.

It sucks that they ended up like this, but that’s all in the past now. They need to find a path forward, and they don’t have the financial or human capital to clear this up any other way.

If these were my parents, I’d give them this same advice.
Last edited by Normchad on Mon Jul 19, 2021 6:59 pm, edited 1 time in total.
Topic Author
FinalSign
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Re: Need advice on how to retire with two underwater properties

Post by FinalSign »

fortunefavored wrote: Mon Jul 19, 2021 2:43 pm Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
Wife and I are on the same page for the most part. We have options for them to move in with us if needed. For now they would prefer to live independently but are just stuck in their situation. They'd love to stay in their house, but can't afford it. Second choice is to move into smaller home/apartment but can't get away from the home yet. Third choice is to move in with us, but they still can't get away from their home to do even that.
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Re: Need advice on how to retire with two underwater properties

Post by Carefreeap »

FinalSign wrote: Mon Jul 19, 2021 6:43 pm Thanks for replys!

They are around 75 years old. They live in KY. FIL was a family practice doc but he's at the end of his career. He shut his solo practice down last year due to pandemic and just didn't reopen. He's struggled to keep up with current medical knowledge already and continuing to work in his field is probably not a wise choice. He was doing some part time work that recently dried up so their financial situation is now an issue. Working as a walmart greater isn't going to do much to help them get away from these properties.

They get $3700/mo from social security combined but their expenses are $5800. The biggest chunk of their expenses are due to the 2 mortgages and HEL plus upkeep on the properties. The home is older and isn't in the best shape but not a total loss yet. They have around $425-$450k in loans on the two properties and $42k credit card debt. One car is almost paid off. Maybe 10k in the bank and zero other assets besides what is in the house (cloths/furniture).

My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the inlaws want the kids to bail them out, but nobody is willing to do that. I think it will take maybe $75k-100k to get them out from under the loans but its hard to get a good estimate.

If they can just get away from the properties they can live on their SoS. One question I do have is would any of these options (bankruptcy/foreclosure) end up with their SoS checks being garnished?
According to this website, no :http://kyjustice.org/can-creditors-take ... ed%20below.

I am trying to wrap my head around a 75 year old doc whose house isn't paid off and owes $42k in ccs? How did that happen?

What are the two balances of the loans on the house?

BTW KY is a recourse state. A KY bankruptcy atty would have to guide them through the timing of foreclosure/short sale and BK.
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TurtleBeatsHare
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Re: Need advice on how to retire with two underwater properties

Post by TurtleBeatsHare »

Sorry to hear this, but people oftentimes make their bed when it comes to these issues. Their only valuable asset at this point is their SS income. Their second most valuable asset is future income. Protecting those is most important. No reason to siphon it off for the properties. That means a bankruptcy. They probably will get to keep most of their personal property because most states have personal exemptions. The real property will be gone—but that’s probably for their benefit honestly as is the credit rating. There’s no reason for retirees with 42k on their credit card and no assets to have access to credit—they’ll only create more problems misusing it. I’d lean towards a Chapter 7 liquidation rather than a Chapter 13 payment plan, but you’ll have to speak to a lawyer about that. You can probably find a flat fee shop that will do this for a few thousand. This is inevitable—it’s just a question of whether they want to lose another year or two of SS/future income before realizing it or pull the bandaid off now.

The other issue to consider is having a real talk with your spouse. Don’t get sucked into helping and don’t let your spouse blame him or herself. Some people can’t be helped and you just have to step back and let them make their own choices.
Last edited by TurtleBeatsHare on Mon Jul 19, 2021 7:09 pm, edited 1 time in total.
fortunefavored
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Re: Need advice on how to retire with two underwater properties

Post by fortunefavored »

FinalSign wrote: Mon Jul 19, 2021 6:58 pm
fortunefavored wrote: Mon Jul 19, 2021 2:43 pm Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
Wife and I are on the same page for the most part. We have options for them to move in with us if needed. For now they would prefer to live independently but are just stuck in their situation. They'd love to stay in their house, but can't afford it. Second choice is to move into smaller home/apartment but can't get away from the home yet. Third choice is to move in with us, but they still can't get away from their home to do even that.
If you're willing to let them move in (and you're REALLY sure about that with your spouse!!) - I'd just ignore the whole thing and wait until it reaches that point. It will just be easier all around. They need to come to the conclusion themselves that they cannot afford their house (hint: they probably won't.)
SouthernInvestor
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Re: Need advice on how to retire with two underwater properties

Post by SouthernInvestor »

I have -- unfortunately -- a good deal of experience here.

The single most important advice has already been stated -- protect your marriage and your relationship.

Think very, very carefully before you make any commitments. Impulsive generosity isn't good for you or your marriage.

Few people really want advice, still less advice that involves a painful transition. "Don't shoot the messenger" exists as an expression precisely because ... people shoot the messenger.

They need a BK lawyer. Absent a health emergency, they've got decent SS income. This is sad, but far from a human tragedy. I'd give advice and even some help, but ideally, it's help executing their BK plan. Don't try talking them into it.
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

FinalSign wrote: Mon Jul 19, 2021 6:58 pm
fortunefavored wrote: Mon Jul 19, 2021 2:43 pm Unfortunate personal experience with this family scenario.

1) You are unlikely to get them to do anything. It will just burn down to the ground around them. Parental-type figures are EXTREMELY stubborn after a lifetime of their decisions catching up to them. You and your spouse may want to seek therapy. Talk through the WORST case scenario (ie, they are kicked out into the street sleeping in their car) and what you and your family are willing to do in such a scenario. Make sure you're all on the same page.

2) The right thing to do, is, of course, some combination of bankruptcy and foreclosures/short sales. After, live off social security and maybe part time work if they can find something. This may also require moving some where inexpensive. But see #1.

I wish you good luck.. and please don't let this drag you down.
Wife and I are on the same page for the most part. We have options for them to move in with us if needed. For now they would prefer to live independently but are just stuck in their situation. They'd love to stay in their house, but can't afford it. Second choice is to move into smaller home/apartment but can't get away from the home yet. Third choice is to move in with us, but they still can't get away from their home to do even that.
This sounds precisely what Bankruptcy is intended for; Get rid of the drowning-from-deht so that they CAN "get away" and start over, be it in the same house or a less expensive house or apartment.

-> Can they afford their current expenses if the other properties and debt are wiped so they can get a fresh start? If not, then moving would be necessary, as it's just prolonging the agony, and in many (all?) cases, one can't declare bankruptcy again within a certain time, so then they really might be 'stuck'.

If they cannot meet current housing expenses or a smaller place on current SS, then they'll need to look at subsidized housing. but with that level of SS, depending upon cost of living area, they may well be okay, albeit in 'reduced circumstances'. And *that* might also be something they are fighting. That plus pride. It can't be easy, but once they do it, at least they should be able to relax a bit (if they do not have more credit cards!). This is what a counselor of one sort of another could help them to understand, in a way that they might not be able to "hear'" from you...

RM
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FinalSign
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Re: Need advice on how to retire with two underwater properties

Post by FinalSign »

Carefreeap wrote: Mon Jul 19, 2021 6:59 pm
FinalSign wrote: Mon Jul 19, 2021 6:43 pm Thanks for replys!

They are around 75 years old. They live in KY. FIL was a family practice doc but he's at the end of his career. He shut his solo practice down last year due to pandemic and just didn't reopen. He's struggled to keep up with current medical knowledge already and continuing to work in his field is probably not a wise choice. He was doing some part time work that recently dried up so their financial situation is now an issue. Working as a walmart greater isn't going to do much to help them get away from these properties.

They get $3700/mo from social security combined but their expenses are $5800. The biggest chunk of their expenses are due to the 2 mortgages and HEL plus upkeep on the properties. The home is older and isn't in the best shape but not a total loss yet. They have around $425-$450k in loans on the two properties and $42k credit card debt. One car is almost paid off. Maybe 10k in the bank and zero other assets besides what is in the house (cloths/furniture).

My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the inlaws want the kids to bail them out, but nobody is willing to do that. I think it will take maybe $75k-100k to get them out from under the loans but its hard to get a good estimate.

If they can just get away from the properties they can live on their SoS. One question I do have is would any of these options (bankruptcy/foreclosure) end up with their SoS checks being garnished?
According to this website, no :http://kyjustice.org/can-creditors-take ... ed%20below.

I am trying to wrap my head around a 75 year old doc whose house isn't paid off and owes $42k in ccs? How did that happen?

What are the two balances of the loans on the house?

BTW KY is a recourse state. A KY bankruptcy atty would have to guide them through the timing of foreclosure/short sale and BK.
Casino is how it happened . . . Thats what we found out about 10-15 years ago and tried to talk them out of it.

They no longer have enough money to throw at the casino so that has stopped as far as we know, but its another huge reason nobody wants to give them cash or pay down their mortgage. They had the mortgage down from $250k to $108k 5 years ago, but now its at $250k plus $77k HEL. The home is probably worth $250-270k. The business office is one unit in a 4 unit building next to a hospital. You'd think its a great place to have a practice, but nobody is interested in it. Most of the new practices seem to be going up in the larger nearby town. There are similar places around town on the market for less than he owes which is $104k.

I'm a little upset at the banks for loaning him so much against his house but I guess at the time he had a successful practice so he didn't seem like a risk. That darn casino though!
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

FinalSign wrote: Mon Jul 19, 2021 7:20 pm

Casino is how it happened . . . Thats what we found out about 10-15 years ago and tried to talk them out of it.

They no longer have enough money to throw at the casino so that has stopped as far as we know, but its another huge reason nobody wants to give them cash or pay down their mortgage. They had the mortgage down from $250k to $108k 5 years ago, but now its at $250k plus $77k HEL. The home is probably worth $250-270k. The business office is one unit in a 4 unit building next to a hospital. You'd think its a great place to have a practice, but nobody is interested in it. Most of the new practices seem to be going up in the larger nearby town. There are similar places around town on the market for less than he owes which is $104k.

I'm a little upset at the banks for loaning him so much against his house but I guess at the time he had a successful practice so he didn't seem like a risk. That darn casino though!
Ouch.

You really should discuss this with a professional, especially if you are not absolutely sure that the "casino" (or similar) is in the past - or will remain in the past.
Otherwise, not matter what help they get now, including Bankruptcy... they could end up in unrecoverable debt again, and possibly without your knowledge until...

RM
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delamer
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Re: Need advice on how to retire with two underwater properties

Post by delamer »

Is there any chance that the commercial unit could be forfeited without them having to lose their home?

If that could happen, would it reduce their expenses enough that they could pay the house mortgage?
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ResearchMed
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Re: Need advice on how to retire with two underwater properties

Post by ResearchMed »

delamer wrote: Mon Jul 19, 2021 7:44 pm Is there any chance that the commercial unit could be forfeited without them having to lose their home?

If that could happen, would it reduce their expenses enough that they could pay the house mortgage?
I''m not sure about current bankruptcy laws, but I thought that one could declare bankruptcy (maybe one type?) and still heep one's home-and-mortgage. Is that possible these days?
IF they could really afford the mortgage (and property taxes, utilities, etc. plus other living expenses), without the other property/debt drag, that might be ideal for them.

However, I *really* worry about the "casino factor" (or its replacement with something similar). That would never end well.

RM
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Normchad
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Re: Need advice on how to retire with two underwater properties

Post by Normchad »

ResearchMed wrote: Mon Jul 19, 2021 7:51 pm
delamer wrote: Mon Jul 19, 2021 7:44 pm Is there any chance that the commercial unit could be forfeited without them having to lose their home?

If that could happen, would it reduce their expenses enough that they could pay the house mortgage?
I''m not sure about current bankruptcy laws, but I thought that one could declare bankruptcy (maybe one type?) and still heep one's home-and-mortgage. Is that possible these days?
IF they could really afford the mortgage (and property taxes, utilities, etc. plus other living expenses), without the other property/debt drag, that might be ideal for them.

However, I *really* worry about the "casino factor" (or its replacement with something similar). That would never end well.

RM
Talk to a lawyer. My understanding is that primary residence is usually protected in bankruptcy, along with a car etc. this is probably more so the case since they have no equity that a lender could attack in court.

But talk to a lawyer. Get the real answer from somebody that knows, and somebody that knows how those laws apply in your jurisdiction.
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Re: Need advice on how to retire with two underwater properties

Post by quantAndHold »

It sounds like they need both counseling and a good lawyer. I mean, it seems they could probably make a go of it with just Social Security in their rural KY town if they could get out from under the debt, but with the gambling problem, it’s not clear that they would stay out of debt.

OP, I feel for you. This stuff is hard.
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neverpanic
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Re: Need advice on how to retire with two underwater properties

Post by neverpanic »

FinalSign wrote: Mon Jul 19, 2021 6:43 pm My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the in-laws want the kids to bail them out, but nobody is willing to do that.
FinalSign wrote: Mon Jul 19, 2021 6:45 pm This is the main reason none of the children are bailing them out. Everybody is afraid the eventual result will be bankruptcy no matter how much "help" they get so it would be a waste if true.
Excellent boundary-setting by the children. That's the best info I've seen in this thread.
Carefreeap wrote: Mon Jul 19, 2021 6:59 pm I am trying to wrap my head around a 75 year old doc whose house isn't paid off and owes $42k in ccs? How did that happen?
If they haven't seen the conspicuous consumption or a bad investment deal, could he be a gambler? It just seems so hard not to have put anything away over the course of a 40+ year career as a relatively high earner in a LCOL area.

Maybe OP did not intend it to be so, but this is yet another cautionary tale for the personal finance forum.

OP - You and your wife, and your wife and her siblings being on the same page - and protecting your cash - is wonderful news and to me a clear sign that everything's going to work out just fine. If it does come to the point that they need to move in or have you paying to house them, do you already have a separate quarters or a separate residence for them to move into? You don't have to answer that, it's just something to think about (living separately vs being under the same roof).
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mkc
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Re: Need advice on how to retire with two underwater properties

Post by mkc »

neverpanic wrote: Mon Jul 19, 2021 9:13 pm
If they haven't seen the conspicuous consumption or a bad investment deal, could he be a gambler?
OP indicated a couple of posts up that casinos were the primary problem.
neverpanic
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Re: Need advice on how to retire with two underwater properties

Post by neverpanic »

mkc wrote: Mon Jul 19, 2021 9:34 pm
neverpanic wrote: Mon Jul 19, 2021 9:13 pm
If they haven't seen the conspicuous consumption or a bad investment deal, could he be a gambler?
OP indicated a couple of posts up that casinos were the primary problem.
Ah, thanks - I see what happened (my post was outdated by the time it went up).
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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Re: Need advice on how to retire with two underwater properties

Post by JBTX »

FinalSign wrote: Mon Jul 19, 2021 6:43 pm Thanks for replys!

They are around 75 years old. They live in KY. FIL was a family practice doc but he's at the end of his career. He shut his solo practice down last year due to pandemic and just didn't reopen. He's struggled to keep up with current medical knowledge already and continuing to work in his field is probably not a wise choice. He was doing some part time work that recently dried up so their financial situation is now an issue. Working as a walmart greater isn't going to do much to help them get away from these properties.

They get $3700/mo from social security combined but their expenses are $5800. The biggest chunk of their expenses are due to the 2 mortgages and HEL plus upkeep on the properties. The home is older and isn't in the best shape but not a total loss yet. They have around $425-$450k in loans on the two properties and $42k credit card debt. One car is almost paid off. Maybe 10k in the bank and zero other assets besides what is in the house (cloths/furniture).

My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the inlaws want the kids to bail them out, but nobody is willing to do that. I think it will take maybe $75k-100k to get them out from under the loans but its hard to get a good estimate.

If they can just get away from the properties they can live on their SoS. One question I do have is would any of these options (bankruptcy/foreclosure) end up with their SoS checks being garnished?
https://www.nolo.com/legal-encyclopedia ... urity.html

To your last question, typically no, but make sure it isn't intermingled with other funds.

Seems to me bankruptcy is the way to go. There's no way for them to get out of it, and family helping out with debts is throwing good money after bad. Sounds like they need a better bankruptcy lawyer.
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Re: Need advice on how to retire with two underwater properties

Post by TurtleBeatsHare »

Garnishing SS in a bankruptcy is extremely difficult to accomplish and is generally not allowed under federal law, with some exceptions (like alimony, child support and debts owed to the federal government, like students loans and taxes). Here's a link that you can read from the Social Security Administration about it.

https://www.ssa.gov/OP_Home/rulings/oas ... si-41.html
PVW
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Re: Need advice on how to retire with two underwater properties

Post by PVW »

FinalSign wrote: Mon Jul 19, 2021 7:20 pm Casino is how it happened . . .
If the problem is gambling addiction, then be very careful with any financial help. Addiction can be very damaging to all involved. Often addicts don't reveal the depths of the problem and they do not have the perspective to evaluate the effectiveness of their own recovery. Without this information, it is difficult to distinguish whether you are providing help or enabling addiction.
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Re: Need advice on how to retire with two underwater properties

Post by Freetime76 »

I am so sorry about the casino. We know a family who had this happen - lost it all, after being in stellar circumstances before. Wonderful people, they moved to FL.

You asked about Social Security - AFAIK, it is protected against the kind of debts you’re talking about (https://www.law.cornell.edu/uscode/text/42/407 if you’d like to go down the rabbit hole). Please suggest that they keep their SS income in separate accounts from any other income or savings, should they go the bankruptcy route - then there is no question of the money’s origin.

Also, I wonder if the practice closure - especially if debt is associated with it - might qualify for any Covid relief measures??
Working would be great, as long as no gambling... or What if they let the debts go to be bad debts? what can the creditors really take if no equity and income is SS? Maybe keep the car, gift the kids cash so it’s not in an account to be garnished and keep the minimum allowed in BK?
Please spell out new acronyms. Thank you.
DoubleComma
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Re: Need advice on how to retire with two underwater properties

Post by DoubleComma »

FinalSign wrote: Mon Jul 19, 2021 7:20 pm
Carefreeap wrote: Mon Jul 19, 2021 6:59 pm
FinalSign wrote: Mon Jul 19, 2021 6:43 pm Thanks for replys!

They are around 75 years old. They live in KY. FIL was a family practice doc but he's at the end of his career. He shut his solo practice down last year due to pandemic and just didn't reopen. He's struggled to keep up with current medical knowledge already and continuing to work in his field is probably not a wise choice. He was doing some part time work that recently dried up so their financial situation is now an issue. Working as a walmart greater isn't going to do much to help them get away from these properties.

They get $3700/mo from social security combined but their expenses are $5800. The biggest chunk of their expenses are due to the 2 mortgages and HEL plus upkeep on the properties. The home is older and isn't in the best shape but not a total loss yet. They have around $425-$450k in loans on the two properties and $42k credit card debt. One car is almost paid off. Maybe 10k in the bank and zero other assets besides what is in the house (cloths/furniture).

My wife and siblings have been helping out with small items like buying them food and paying some utilities but nobody wants to pay off the loans. I do think the inlaws want the kids to bail them out, but nobody is willing to do that. I think it will take maybe $75k-100k to get them out from under the loans but its hard to get a good estimate.

If they can just get away from the properties they can live on their SoS. One question I do have is would any of these options (bankruptcy/foreclosure) end up with their SoS checks being garnished?
According to this website, no :http://kyjustice.org/can-creditors-take ... ed%20below.

I am trying to wrap my head around a 75 year old doc whose house isn't paid off and owes $42k in ccs? How did that happen?

What are the two balances of the loans on the house?

BTW KY is a recourse state. A KY bankruptcy atty would have to guide them through the timing of foreclosure/short sale and BK.
Casino is how it happened . . . Thats what we found out about 10-15 years ago and tried to talk them out of it.

They no longer have enough money to throw at the casino so that has stopped as far as we know, but its another huge reason nobody wants to give them cash or pay down their mortgage. They had the mortgage down from $250k to $108k 5 years ago, but now its at $250k plus $77k HEL. The home is probably worth $250-270k. The business office is one unit in a 4 unit building next to a hospital. You'd think its a great place to have a practice, but nobody is interested in it. Most of the new practices seem to be going up in the larger nearby town. There are similar places around town on the market for less than he owes which is $104k.

I'm a little upset at the banks for loaning him so much against his house but I guess at the time he had a successful practice so he didn't seem like a risk. That darn casino though!
This is tough, and I agree with the the other posters that you are under no moral obligation to bail them out. Based on the current facts I think they are headed to BK.

Now, if this was my family, I very well might buy the in-laws house and let them live in it at a very modest rental rate. A below market rate. I would do this for a couple reasons...1) I think moving my in-laws into my home would be detrimental to harmony in the house and DW and I's relationship which is worth much more than a house. 2) in the long term real estate has tended appreciate. It wouldn't be a investment so to speak, but I would think in 10-15 years that home would appreciate enough to get my investment back.

As for the commercial property, I would let it go to foreclosure.

Should the In Laws seriously be considering BK, I would make sure you can in fact buy this house without impacting the BK or being looked at as some preferential payment.
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Re: Need advice on how to retire with two underwater properties

Post by 2tall4economy »

Classic bankruptcy scenario if I ever saw one. As others have said, getting them into a rental (or slightly less good a special agreement on their house, if it's affordable for them) and forcing them to cut up credit cards would be a wakeup call.

but not sure you want to be the person that pushes them into it. They need to choose themselves.

If they do it "because you said so" they'll resent you for it I think.

not to mention, in my experience they're not going to start listening now when they haven't their whole life.
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