EXPERTS...7 or 13?

[BKINAZ]

$70k- Unsecured Credit Card Debt ($1,500 per month in payments)
$88k- Secured Debt...HELOC/2nd ($550 per month in payments)
$200k- Land investment gone bad. Land secured. ($1,100 payments)
1st- $366k / House Value- $300k (official appraisal, 10 days ago...)

* I predict I will make $20k more per year after we file with my business. So that money...most goes directly to 13 debt.

Which would you file...and why? The $88k second as many know is the problem for me, as well as "working" for the debt with extra income. So I could strip the $88k in 13...but by making more money don't I pay the $88k back anyway?

[HHM]

What are your plans with the land investment? I assume you are going to walk away.

When was this "official" appraisal?

"Best" thing you could do (and you may not want to hear it)...if you qualify for a chapter 7....
File chapter 7, surrender your house and land. You are negative nearly 20% just on the first mortgage. There really is no point in keeping the house.

If you're going to try to keep your house (bad idea, but in any event), then long term you are better off doing a 13 and striping that 2nd mortgage.

[BKINAZ]

1. Appraisal...10 days ago.
2. Land. Filed a deed and lieu in Sept...they are just getting to it now. Not sure how that works. Owe $200k...worth...$135k...do we get a 1099 with Deed in Lieu for the difference?
3. House. If we fix our debt...we can afford our house. Wife REALLY wants to keep the house and I am for that as well. Since our new president (who I didn't vote for) might work with us our "under waterness" that will obviously help. We are trying to do a mortgage mod which will save us a few hundred a month if they do it....I think they will.

So with this knowledge...sounds like you would recommend 13? In your opinion...I shouldn't worry about making the extra income...or having that being a major deciding factor? ie...Am I making to big of deal out of it?

[HHM]

1. Appraisal...10 days ago.
2. Land. Filed a deed and lieu in Sept...they are just getting to it now. Not sure how that works. Owe $200k...worth...$135k...do we get a 1099 with Deed in Lieu for the difference?
3. House. If we fix our debt...we can afford our house. Wife REALLY wants to keep the house and I am for that as well. Since our new president (who I didn't vote for) might work with us our "under waterness" that will obviously help. We are trying to do a mortgage mod which will save us a few hundred a month if they do it....I think they will.

So with this knowledge...sounds like you would recommend 13? In your opinion...I shouldn't worry about making the extra income...or having that being a major deciding factor? ie...Am I making to big of deal out of it?

1. ok..
2. Yep, there will still be a deficiency issue even with a DIL, but the BK will handle it.
3. Even with a mortgage mod, depending on what they actually do, you are probably better off in the long run surrendering the house, downsizing in the near term and then purchasing a home in a couple years.

Correct, I think you are making too big a deal about the future income. Let me ask you this, putting "future income aside", on your current income, is the mortgage payment on your 1st mortgage more or less than 28% of your gross monthly income. If its more (and even after a mod would still be more), you MUST surrender, it is simply too much house. If the payment is 28% or less, then your ok to keep the house, but so long as you can live with the fact that you will underwater in that house for the better part of 10 years; you will be a slave to the house because you won't be able to sell it. I think you should bail on it now and get a true fresh start.

Also, I wouldn't hold out much hope on the Obama stuff, it seems to only be a narrow class of persons that will qualify (basically none).

[OhioFiler]

I don't understand why you want to keep the $66,000 negative equity in the house. I understand being attached to our homes (we are for sure) but if we were that far in the red we'd let it go and start with another home. Are there builder's in your area with excess inventory who are willing to give you a lease option?

[BKINAZ]

No builders in area...if any homes go up in value it will be our area first. We live on an acre, we are 10 minutes from her work and we plan on being here for another 10 years at least. ie...it won't go down.

The loan mod will get us down in the 31% range...but understand I am in the perfect storm right now where I am not trying to make money so that we can qualify for 7 (if that is the route we go) and it really would be little effort for me to make another $20k, and that gets us into your 28% range.

[OhioFiler]

No builders in area...if any homes go up in value it will be our area first. We live on an acre, we are 10 minutes from her work and we plan on being here for another 10 years at least. ie...it won't go down.

The loan mod will get us down in the 31% range...but understand I am in the perfect storm right now where I am not trying to make money so that we can qualify for 7 (if that is the route we go) and it really would be little effort for me to make another $20k, and that gets us into your 28% range.

Let the house go and buy it back for $175,000 after the auction.

[BKINAZ]

Sounds good in theory...could you give us the name of the bank that you use to get a loan for a house while in BK?

[OhioFiler]

Sounds good in theory...could you give us the name of the bank that you use to get a loan for a house while in BK?

It takes a while for the foreclosure process and the bank to get the house listed. It's worth a try!

[BKINAZ]

Actually it's not. When you stop making payments on bills...banks/mortgage tend to get cranky about lending out money for you to buy another house...also...they really frown on letting a house go through forclosure, short sale or turn in the keys.

Lastly...

It's illegal.

[HHM]

Plus, in most states, the current owner is forbidden from bidding at the foreclosure.

I still think you should walk away. Your scenario contains too many what ifs, and only ifs; meaning your success is out of your hands, especially when it comes to the real estate market rebounding.

[BKINAZ]

I appreciate your opinion and I think some of the "ifs" will be cleared up as we go along in this process. We have thought about it...a house 1,000 sf bigger than ours is $1,000 less a month to rent.

What is the going number (years) of being able to ever buy a house again in the future? After year three? 10?

[catleg]

What kind of loan mod are you talking about?
Ultimately it looks like if you go the 13 route, you have your current mtg payment on the 366k plus whatever your ch13 plan payment is takes care of everything else. Is that 366k over 30 years? Since you can't really get financing for a house at the moment anyway I guess the key decision is do you think you can stay put for a while. Even so you'll have negative equity for quite a while. Cause if you need to move then you're going to have to convert to a 7 (if you can) and do a restart.
If you do a 7 right away you eliminate the plan payment and mortgage entirely and substitute rent, trouble is, can you find a house you like and want to rent and can continue to rent for a while.

I guess it comes down to: mortgage pay + ch13 plan pay - mtg tax ded ?= rent
the intangibles being (a) can you find a house to rent that you are happy with and (b) how do you feel about being supervised by a court for 5 years?

[BKINAZ]

First...it's my fault we are in this mess. Second, she REALLY wants to stay...I do too. With that said I think it is extremely possible to stay as we can afford it after dumping the other payments...though we will think about it as we proceed. I've never rented...well...not since I was like 18. How often do you have to move when you rent? (you want to stay, the people that own the house wants to sell..or get us out for whatever reason)

The HELOC...I have to look...like a 5 year loan? I have to look...haven't in quite a while...we paid off the other and raised the limit (good move...shaking head) and started this one a couple years ago. But...good question...I need to look...not a balloon though. (he says hoping)

[BKINAZ]

(b) how do you feel about being supervised by a court for 5 years?

That's a good question. I THINK so. I asked this in another thread...what do you have to provide to the trustee each year...tax returns? Bank statements?