Could somebody please explain this..

[IBroke]

Hi,

My mum is looking forward to her Chapter 13 in a couple of months. She is self-employed (cleaning-business) and makes about $2,000/month. As an additional income, my grandmother "donates" about $2,500/month of her pension to her.

That would put her right at the edge of the median income (abot $4,400 here in FL). Under a proposed Chapter 13 and the way I "planned" it, her "fixed" costs under the plan would be a regular $2,560 Mortgage payment and a $185/month payment to the Trustee for the attorney-balance ($1K) and the mortgage we would be behind ($5K). That would be based on a 36 month plan.

According to the attorney, she would also have to pay an additional $4K over that timefrime for her furniture (valued $5K minus $1K exemption).

That would bring the total payment to the Trustee to about $300/month (incl. 8.8% fee). Does this sound right?

I also stumbled over this article on the internet, indicating that somebody who is making MORE than the median AND still has a negative DMI might not have a 36- or 60-month repayment-plan at all BUT if you are below the median, you would be stuck with the 36 months?! what am I missing here?

Here's the link:

http://blsbulletins.blogspot.com/200...pinion-of.html

Thanks!

[BigJohn]

Does her grand mother live with her?

How old is your grand mother?

Is the furniture new, like in the last 6 months? Why is it valued at $6000?

[IBroke]

Does her grand mother live with her?

How old is your grand mother?

Is the furniture new, like in the last 6 months? Why is it valued at $6000?

No, furniture is more than 3 years old. I just jused this figure to come up with an amount ($5K) that might be the MAX in assets my mother would have. She doesn't have any money-market accounts, jewelry or anything else of value.

Actually, my grandmother would be her mother and she's 87.

Does it make a difference if she would live with her?

[StartingOver08]

You are using too much for the furniture. Most furniture goes for garage sale prices - next to nothing. Is it that you are using the homestead exemption for your equity in your house - or are you giving up the house?

[fltoo]

Ok, this might be an obvious question, but why is mom keeping the house? The payment is way too high for her income. How long is grandma's contribution going to last?

Is there a lot of equity in the house?

And, agreed, you can probably value the furniture at around 500. bucks.

[IBroke]

You are using too much for the furniture. Most furniture goes for garage sale prices - next to nothing. Is it that you are using the homestead exemption for your equity in your house - or are you giving up the house?

House will be kept (actually, we didn't expect to keep it but a great offer of the 1st mortgage company - $900/month less, same interest at 7.25 fixed for the remaining 27 years and all due to a $250K-reduction in principal balance).

The house is quite big (3,700sqft) but considering that it contains furniture of 3 people living there (mum, granny and me), you're probably right.

And yes, this house is exempted under homestead.

Right now, with the first mortgage at $547K on the note (will be adjusted to $300K after the third "trial"-payment of the new offer) and the second at $151K, there is no equity (current estimated value at $400K), so we want to get rid of the second (stripping) AND might be able to take advantage of the lower principal of the new mortgage, meaning we could reduce our total amount owed on the house from $700K to $300K. attorney is working on it to figure out the best way.

[IBroke]

Ok, this might be an obvious question, but why is mom keeping the house? The payment is way too high for her income. How long is grandma's contribution going to last?

Is there a lot of equity in the house?

And, agreed, you can probably value the furniture at around 500. bucks.

Don't underestimate granny - she's in GREAT shape - never sick!

Because - if handled correctly - this house could make a HUGE profit for us. With a mortgage-balance of $700K and a monthly payment of $4,500 (what we usually paid for the two mortgages), it wouldn't make much sense and couldn't be managed. That's why we originally planned a Chapter 7.

This new offer changed everything. If the second can be stripped, we keep the house, get a reduction in payments to $2,550 AND, even more important, reduce the amount owed to $300K.

Now assume we fullfill the 3- or 5-year plan. The second mortgage is eliminated. Our house is located in the Tampa Bay area - we were severely hit by the Real-Estate breakdown. Now guess what the value for the house might be in 3-5 years? Experts are predicting our area to be a great investment. If you have money right now, you buy a house in our area.

Let's say the value goes back up to $550K and (what we DON'T expect), granny passes away after 3-5 years. We (BTW, I also think I'll have a job by then and can contribute to the payments) could sell the house AND use the $250K to pay a different one IN CASH! No mortgage from then on.

now wouldn't you want to keep the house in our position? Where would we be at that time if we would have to rent?

[IBroke]

That brings me back to the link I posted above:

To whom does this ruling of the 9th Circuit Court apply?
If we would be above the median, what would the unsecured creditors get and over what timeframe, if any?

I'm just thinking what the consequence would be IF this ruling applied to us: The second mortgage could be discharged/stripped virtually IMMEDITELY - if we would make it above the Median AND end up with a negative DMI. That's where the "high" mortgage would come in handy..

But I guess that only applies to "some" districts and courts..

[fltoo]

Ok, understand now. But, don't be filing anything until these "reductions" are in place.

I just got help for someone to eliminate the junior liens on two condos on one of the islands off the coast of downtown.

But, I don't know who you are talking to about this area being a good investment. I do NOT see a recovery soon and when the recovery comes, I see a flat market for 8-10 years.

Buyer numbers need to catch up to inventory before anything changes.

[BigJohn]

Don't underestimate granny - she's in GREAT shape - never sick!

Because - if handled correctly - this house could make a HUGE profit for us. With a mortgage-balance of $700K and a monthly payment of $4,500 (what we usually paid for the two mortgages), it wouldn't make much sense and couldn't be managed. That's why we originally planned a Chapter 7.

This new offer changed everything. If the second can be stripped, we keep the house, get a reduction in payments to $2,550 AND, even more important, reduce the amount owed to $300K.

Now assume we fullfill the 3- or 5-year plan. The second mortgage is eliminated. Our house is located in the Tampa Bay area - we were severely hit by the Real-Estate breakdown. Now guess what the value for the house might be in 3-5 years? Experts are predicting our area to be a great investment. If you have money right now, you buy a house in our area.

Let's say the value goes back up to $550K and (what we DON'T expect), granny passes away after 3-5 years. We (BTW, I also think I'll have a job by then and can contribute to the payments) could sell the house AND use the $250K to pay a different one IN CASH! No mortgage from then on.

now wouldn't you want to keep the house in our position? Where would we be at that time if we would have to rent?

You might want to study how long it took for the value of a house to come back during the Great Depression. Some believe the value of houses is going to drop a lot more before it bottoms out.

[IBroke]

Ok, understand now. But, don't be filing anything until these "reductions" are in place.

That's the tricky part - timing. I might have to ask the lender to delay the reduction of principal because once that happens, the second mortgage isn't 100% unsecured anymore, making it UNstrippeable..

Filing too early, and the trustee could still argue we would be responsible for the $3,400/month and so, wouldn't be able to afford it.

Not easy to find the right time while being under a mortgage "trial-period".

But, I don't know who you are talking to about this area being a good investment. I do NOT see a recovery soon and when the recovery comes, I see a flat market for 8-10 years.

Buyer numbers need to catch up to inventory before anything changes.

I can't find that comment anymore but it was a finincial "guru" on CNN. I now that it might take a while to make a huge profit, but I'm positive we will make a great deal at $300K.
Although prices went down (and might continue falling through 2010), I'm optimistic. A year ago, we put our home on the market for a short-sale and within a week, we received an offer for $380K. After all, we paid $370K for it 5 years ago (model-home, conservation-area etc.) and when you imagine that you get a debt-forgiveness on your own home in the amount of $400K(!!), I guess there's not much to complain about. Considerig the $400K went into our own pocket (also some home-improvents like a pool - $40K, new kitchen - $40K etc.), this new offer is a true blessing.

In addition, we will be current on the mortgage again - we haven't made ANY payments for 2 years now..

[otguy2003]

We were all set for a 36 month plan. The judge squashed it and put off the confirmation until an amended plan could be done. She did it because we were over the median income. We now go 60 months

[IBroke]

We were all set for a 36 month plan. The judge squashed it and put off the confirmation until an amended plan could be done. She did it because we were over the median income. We now go 60 months

I assume your DMI was above $0, right?

[EricaCallaha]

The other piece that we don't know is who all is living with mom. All of the numbers depend on who is living in the household and who she is supporting. Have you talked to an attorney yet to see where the numbers actually fall. I did some calculators and means testing before we retained counsel and our payment was significantly different. It is very complicated to figure what the payments actually are. It is a huge numbers game.

Good luck. I sincerely hope you are right about your house. We are in Utah and the "experts" believe that we are no where near the bottom of our market yet.