Preparing for my Chapter 13

[vicmost]

I'm a newbie posting here but I have spent countless sleepless nights reading the many fine posts! I have gathered as much information as I can and now have some specific questions pertaing to my case. Many Thanks to all of you for sharing your experiences and knowledge!!!
First my story. ...
I lost my management job about two years ago and was unemployed for 8 months....At this time I was in the middle of a room addition and total kitchen remodel..etc...etc...
I finally found work and took a step backwards in my career and went back to repairing cars for aproximately 50% of what I used to make. I was hopefull I would get a job close to my old pay...So...I used up my 401k savings, took out a terrible second loan and have been juggling credit cards to survive ever since...sound familuar?
I was hopefull for a better tomorrow.....

AND HERE WE ARE! IN THE MIDDLE OF THE SECOND GREAT DEPRESSION!

Anyhow, here is my current financial situation.

My Income 52k
Spouse 14k
1 dependent 3 year old

First Mortgage $1726 BAL $285,000
Second Mortgage (Int only) 1028 165,000
MONTHLY PAYMENT $2754 BALANCE $453,000
current house value is $311k and dropping!

Credit Cards
PAYPAL BUYERS CREDIT $100--BAL--$4,597
PENTAGON FEDERAL C.U. $80--BAL--$4,850
CHASE / BANK ONE $100--BAL--$4,145
CHASE CARD SERVICES $275--BAL--$9,850
SEARS $75--BAL--$2,200 (Secured?)
TOM CAT MASTERCARD $325--BAL--$16,800
WELLS FARGO CREDIT $300--BAL--$12,890
HOME DEPOT $100--BAL--$2,000 (Secured?)
WASHINGTON MUTUAL $338--BAL--$13,096
VISA-RIVERFRONT $175--BAL--$8,000
Dell $75--BAL--$2100 (Secured?)
Lowes $22--BAL--$274
MONTHLY PAYMENT $1963 TOTAL BALANCE $80803


Boat Loan $300 $15800 (Soon to be sold!)

Total Unsecured Debt $80,803
Secured Debt $ 486,800
Assets
2001 Lexus IS300 (190k) $5500
1996 Toyota Previa (145k) $2500
1989 Zieman trailer $600
1983 Honda ATC $300

Wow! It sure makes me feel bad when you add up all the numbers and through them out there for public viewing!
My Plan
I've decided to try for a chapter 13 in 6 months and I will try to "lien Strip" the second mortgage. I understand that I will have to wait until my property value falls below what I owe on the first.... I'm waiting for 6 months for this to happen. This time frame also works for me because I will be able to file my taxes, save money for an attorney and practice living on a real budget. It also helps distance me from any objections from creditors..etc...I am currently not behind on anything but I will start going into default next month.
I plan on not paying my second mortgage at all durring this time because I doubt they will foreclose on property that they would loose money on.
I will pay my first mortgage possibly being 30 to 60 days behind (depending on tax refunds). The unsecured creditors I'll stop paying 90 days from last use. Unless some of those creditors are considered secured (see above)...

1st question - Is this a solid plan?
2nd ?----I was promised a better position with my current company but do to the current economy that doesn't look likely...I need to invest in my current occupation (a Lexus technican / Mechanic) and purchase tools.
This of course would put me in debt about 10k more than I am now. This debt would of course be secured and I would have to include this in the plan. It would also help me income increase overtime but who knows what lies ahead? Is this a bad move?
3rd question---I work at a Lexus dealership. Because I have worked there so long I could take advantage of a program where they supplement my income $400 per month to lease a new Lexus...I think I can keep my cars running for the next 5 years but even us mechanics have to pay for parts!..
4th ?--I am right at the boarder line for the median income for California. My wife currently works because my mother-in-law provides free day care. My wife wishes to return to college. If I fall below the median income I believe I can get into a 3 year plan but it would most likely have no disposable income. I only know of one BK Guru that has a 0$ plan (JUSTBROKE). But I believe he lives in Florida (btw-that guy missed his calling! he should have been a lawyer)...
Anybody know if those plans are valid in California...

I of course have a few other questions but I think i've rambled enough!!

I humbly thank you kindly in advance for any advise or comments

[Flamingo]

Your household income for 3 is only $66,000 per year and I am amazed you made it this far with that debt but I see you utilized all your 401(k) (bad move), savings and took out a loan. The next thing you will do, if you haven't already done so, is rob Peter to pay Paul putting you further in debt. Can you really afford that house? I suggest going to a BK attorney now and getting a free consultation taking with you a complete listing of all your debts, monthly payments, sources of income, paystubs, listing of assets and all accounts and a copy of your most recent state and federal income tax return to get a good handle on what you should do and when. Best of luck to you!

[rrockinggramma]

I agree with Flamingo. I think you need to really reevaluate the house situation. Look around and see if anything is out there much cheaper that you can lease w/option to buy at a later date. But if you keep the house, I know that the California district is more open to lien stripping than any other area. But I think you should meet with a few attorney's and get their take on the situation and then begin to plan out your filing, getting ready for it. ALso, you might just qualify for a chapter 7 and be able to keep your tools of the trade etc. GL

[lrprn]

Filing Ch 13 is definitely not a do-it-yourself pro se (without a lawyer) option. If you haven't already, it's time to set up appointments now to meet with at least 3-4 experienced bankruptcy lawyers in your area. Most give free or low cost initial consultations and can answer the kinds of questions you are asking us with some reliability and knowledge of the latest Ch 13 case law decisions in your area of CA to boot (there are MANY gray areass in Ch 13 law that can be interpreted several ways depending on your court district). Get going and keep us posted about what you find out!

[vicmost]

Thanks for the responses. I have been robbing Peter to pay Paul. ..Peter is now officially tapped out!
I also recieved about $18k from my insurance company when my friend crashed my truck January 2007.
I wish I hadn't have touched my 401k but I did...Hindsight is 20/20..
I have spoken to one attorney and he said I qualified for chapter 7 but I also might be able to save my house with a chapter 13 / lien strip...My payment would be the $1726 first + regular living expenses + chapter 13 plan..with his estimate of $200 per month.

I rent a room out and recieve $600 per month cash. I also have my mother-in-law living with me...She isn't claimed on my taxes becuase she is here on a Visa from the Phillipines...Renting in my area would cost me the same or more than what I would be paying on the first.

I will let the house go if I cannot lien strip the 2nd mortgage in a chapter 13 and at that point would convert to a chapter 7.

I am optimistic that I can earn more money in the future even with my current job. Since I haven't been a mechanic for several years I was pretty rusty at first but I'm getting much better.

Do you think the purchase of additional tools for my trade would hurt my bankruptcy filing in 7 months?

[vicmost]

Filing Ch 13 is definitely not a do-it-yourself pro se (without a lawyer) option. If you haven't already, it's time to set up appointments now to meet with at least 3-4 experienced bankruptcy lawyers in your area. Most give free or low cost initial consultations and can answer the kinds of questions you are asking us with some reliability and knowledge of the latest Ch 13 case law decisions in your area of CA to boot (there are MANY gray areass in Ch 13 law that can be interpreted several ways depending on your court district). Get going and keep us posted about what you find out!

I definately wouldn't do it pro-se. My hats off to those that do!

Thanks!
I'll make some more appointments...

[justbroke]

First, lrprn is very accurate in that Chapter 13s that are asset cases should not be attempted pro se. Having wrote that, nothing stops you (or has stopped me!) from doing it.

II humbly thank you kindly in advance for any advise or comments

I'm with Flamingo on this home issue. It is definitely a burden now, and you are betting on the value of the house going down. That's a lot of house for $66K in annual income. The home's value needs to go down another solid $30K before you can entertain a lien strip.

You have to plan for the possibility that the lien strip may not be possible. At the same time, I don't give up hope -- although my posts suggest otherwise -- that the Federal government is actually able to put a program in place ot help homeowners for real this time.

I would also caution on not expecting the 2nd mortgage holder to not foreclose. If they can get $30K right now... it may seem like a real bargain over waiting and getting nothing. Of course, that's just one of many possibilities, but until your home is worth less than your first mortgage, use caution when wondering what the 2nd lienholder will do. Most of them do nothing, because there's absolutely no value.

While I'm in a .2% (or 2%) plan, that still doesn't mean that I did the best job I could at keeping a good budget. My allowances allow me to keep over $2,900/month but it still seems like I have no money left over after all the bills are paid.

[BigJohn]

Vimost, it seems like you got to get a real good appraisal of your home. Bankrupty attorneys generally know appraisers that can do a 'bankrupty' appraisal. Get the appraisal and then you will know where you truly stand.

How big is your family? You might be able to take more deductions so you and your wife take more income home.

Does the renter pay cash or check?

Not to scare you, but what kind of visa does your mother-in-law have? And how long has she been here?

You say you need tools and they would be a secured loan. Any chance of buying the tools using unsecured credit cards?

[vicmost]

First, lrprn is very accurate in that Chapter 13s that are asset cases should not be attempted pro se. Having wrote that, nothing stops you (or has stopped me!) from doing it.

I'm with Flamingo on this home issue. It is definitely a burden now, and you are betting on the value of the house going down. That's a lot of house for $66K in annual income. The home's value needs to go down another solid $30K before you can entertain a lien strip.

You have to plan for the possibility that the lien strip may not be possible. At the same time, I don't give up hope -- although my posts suggest otherwise -- that the Federal government is actually able to put a program in place ot help homeowners for real this time.

I would also caution on not expecting the 2nd mortgage holder to not foreclose. If they can get $30K right now... it may seem like a real bargain over waiting and getting nothing. Of course, that's just one of many possibilities, but until your home is worth less than your first mortgage, use caution when wondering what the 2nd lienholder will do. Most of them do nothing, because there's absolutely no value.

While I'm in a .2% (or 2%) plan, that still doesn't mean that I did the best job I could at keeping a good budget. My allowances allow me to keep over $2,900/month but it still seems like I have no money left over after all the bills are paid.

My hero has arrived! Lol..I admire you filing "pro se" and I actually filed a chapter 7 myself in 1993 when I got divorced. This chapter 13 is much more complicated for me. I'm sure I can find a good attorney over the next few months....Ironically I find myself in the same financial situation once I remarried?

The attorney I did talk with said I could easily get a chapter 7 with no problems. He did say there was a chance with a chapter 13 if I really wanted to save my house. At this point I was totally unaware about lien stripping and the chapter 13 process.
Feb 1st is when I will be offically 30 days late on both mortgages..The way I look at things now is that I really don't have anything else to loose. I'll do my best to save money and stretch out the foreclosure process as long as possible hoping that my house drops in value...(never thought I would want that!)
I live in the Inland Empire of California..This is the second worst real estate market in the nation! Second only to Detroit.
( http://www.housingpredictor.com/california.html )
I'm basing my home value from what I see on http://www.zillow.com/
My homve value shows $311k but I see that the actual homes sold on my street were from $248k- $290k.

If the current market trend continues I think I might make it..

My income is pretty low right now but I feel confident I can build it up. I'm a a mechanic. And although I used to this kind of work before it has been quite a few years since I have done it. I had to re-train myself on the current procucts and procedures. A year has gone by now and I've improved quite a bit. My income has been on a wild roller coaster. Sometimes I make a really large check and then sometimes I don't..It's a combination of my experience and the economy...

At this point I'm not putting myself out to much. If I end up filing chapter 7 then I will just be that much more prepared..

So,
Do you have any tips or links on how to string out my pending foreclosure process...The lawyer feels that that Country Wide won't foreclose on my second and suggests that I pay my first only..
What if I pay them every other month? I know it takes about 5 - 6 months for the foreclosure process but I was told that they are so backed logged it is taking more like 8 - 10 months..Btw....I will stop paying my credit cars in about 2 months time..

Do you think it unwise to invest in some tools for my work? I know they will be a secured debt. I feel if I don't do it now I won't have the opportunity later. At the same time I don't want to mess up the bk process..

Thanks to everyone for your advice and patience...I'll keep researching!

[vicmost]

Vimost, it seems like you got to get a real good appraisal of your home. Bankrupty attorneys generally know appraisers that can do a 'bankrupty' appraisal. Get the appraisal and then you will know where you truly stand.

How big is your family? You might be able to take more deductions so you and your wife take more income home.

Does the renter pay cash or check?

Not to scare you, but what kind of visa does your mother-in-law have? And how long has she been here?

You say you need tools and they would be a secured loan. Any chance of buying the tools using unsecured credit cards?

I will spill some beans!.....(anonymously of course!)
My mother-in-law is here on a tourist visa of 6 months...It expired about 4 years ago! My wife and I werent' the ones that petitioned her so I am not legally responsible for her ( I checked with an immigration attorney). Her only legal recourse is for my wife to petition her when she becomes a citizen...btw my wife won't be part of the petition as all of the debt is in my name..

I've been renting out a room since I bought the house in 1997 and we have been roomates before. He pays $600 cash. And he pays me an additional $300 on top of that for some money I loaned to him to get a car (all in his name over a year ago)...

Legally this is a No! No!...But morally I have no problem with it...I also send aproximately $100 a month back the phillipines to help her family there..I considerd it like a "push in blackjack"!...

[vicmost]

Big John,
I don't have any credit available on credit cards. I do have a line of credit with Snap-on tools for $12k and One with Matco tools for $18k ...These were recently approved but I haven't purchased anything...I want to make sure that if I do purchase anything it won't be considered fraud. It is my understanding that these accounts are considered secured. meaning that if I don't pay they will repo the tools..

[vicmost]

Big John,
I am going to get my house appraised. I'm just going to wait a few months. According to zillow.com my home value has dropped $17,500 in the last 30 days...This is backed up by recent sales..The tax accesor valued the property and buildings at $187k...
.....Zillow just updated...My house is now at $308k!! I've only got $20,400 to go! (If zillow is accurate)...I suggested to the attorney that I have one of the appraisers that work with countrywide do an appraisal...That way they can't say it is unbiased...However, my research has shown that it should be an apraiser approved by the court...I'll need to research this further...

Thanks !

[justbroke]

Zillow just updated...My house is now at $308k!! I've only got $20,400 to go! (If zillow is accurate)...I suggested to the attorney that I have one of the appraisers that work with countrywide do an appraisal...That way they can't say it is unbiased...However, my research has shown that it should be an apraiser approved by the court...I'll need to research this further...

Thanks !

I don't trust the Zillow valuations. That's unless you choose your own comparables, as Zillow seems to choose just about anything.

If you have a spare $30, try one of the Electronic Appraisal services (like Electronic Appraiser). They have been the most accurate that I've seen... and of course they charge for it ($30).

My hero has arrived!

Just long enough to become the villain.

Do you have any tips or links on how to string out my pending foreclosure process...The lawyer feels that that Country Wide won't foreclose on my second and suggests that I pay my first only..
What if I pay them every other month?

I don't have any links. You could challenge the documentation or, especially in California, claim that the entity foreclosing doesn't have the right to foreclose. Go the the Bankruptcy Law Network and look up foreclosures in California. It was pretty surprising how it can work in California due to underlying non-bankruptcy laws. However, a skilled lawyer should probably be doing the challenge if you think you can get the foreclosure action dismissed. If you're just delaying, you can probably do it yourself.

Do you think it unwise to invest in some tools for my work?

Make sure you check the exemptions for California. Since you're giving up the house, you should probably use System 2. Make sure the tools are covered. I don't have time to look, as I'm driving form Chicago to Michigan in 1 minute!!!

Good luck.

[vicmost]

Thanks, I'll check them out.

[BigJohn]

vimost, willow is not very acurate and generally reports property higher then it is. Spend $350.00 and get an appraisal done by a certified appraiser. Ask the appraiser if they do 'bankrupty appraisals'. (hint).