13 or 7?

[spidge]

I know this may have been asked many times in the past but as we all know we like to talk and get opinions on our specific situations.

So I have been making payments to an attorney for over a year to file a ch 7(not yet filed), but now I would like to look into a ch 13 with a lien strip.

How is it determined that I can do a ch 7 or ch 13?

House value 225,000.
1782 1st mortgage(interest only). Ballance 317,000
500+/_ 2nd mortgage(variable rate).Ballance 93,000
37,000 in CC debt, no payments since 8/07.
No car payments but the 2 we have are worth about 4,000 each.
I have 2 teenage daughters that should allow for say 2,000 a month allowance?. I wish.

We take home around 4500 per month, but thats working tons of OT that is not always available. We make about 66,000 per year.

According to the means test here http://www.legalconsumer.com/ there seems to be some wiggle room. Could I make a budget showing a particular amount of left over cash in order to qualify for the ch 13 enabling us to strip the 2nd mortgage? For instants, in the budget I recenlty sent my attorney I stated 800 for groceries and houshold needs for a family of four yet the site above stated 1370.

Now let me complicate it a bit more and say that as a result of the hardship withdrawals from my 401k last year our income has been elevated to the point that we owe the feds almost 1,000 and the state 500, yet we have no way except very small payment per month. Would this be included in the ch 13 payment plan?

Thank you vary much if you decided to take the time to read this and cast some light on ot for me.
PS My attorney always wants to be face to face for any inquiries.

[spidge]

Bueler, Bueler?

Come on now, I know theres some people here that love to give advice. I'm like a sponge at this point. Bring it on. Good or bad.

[lrprn]

So I have been making payments to an attorney for over a year to file a ch 7(not yet filed), but now I would like to look into a ch 13 with a lien strip.

How is it determined that I can do a ch 7 or ch 13?

*YOU* do not get to determine whether you can file Ch 7 or Ch 13. The mandatory Means Test and Schedules controls that.

The deciding factor is how much disposable income (if any) that's showing on the Means Test and Schedules after they are completed using the required IRS and Census Bureau figures mixed with your own actual figures.

If after everything is calculated using very complex cross-comparisons, you have less than approx $165/month showing as disposable income, then you can file Ch 7.

However, if after everything is filled in and calculated, you have more than approx $165/month showing as disposable income, then you have to file Ch 13 because you have sufficient leftover income to support a 3 or 5 year plan and repay some of your creditors.

If your lawyer has already determined that you qualify for Ch 7, frankly it is very difficult to file Ch 13 instead because you don't have enough disposable income to support a Ch 13 plan.

House value 225,000.
1782 1st mortgage(interest only). Ballance 317,000
500+/_ 2nd mortgage(variable rate).Ballance 93,000

Ok, I'm going to ask the obvious....why in the world would you want to try to save a house that is worth $185,000 less than you owe on it? Even if you strip the 2nd mortgage, you will still owe almost $100,000 more than the house is worth.

It would take many, many years for that degree of 'upside down' to be reversed, if it ever could be. Let's say you try to sell the house in the future. You will very likely never get what you actually owe, so you'll be dragging this debt around with you for most (if not all) of your lifetime trying to pay it off. And for what? A house that could be replaced in 5-10 years (or even earlier) after filing Ch 7 but purchased for its true market value with no trailing rolled-over debt to pay off.

So....help us understand why are you are seriously considering trying to save this house?

We take home around 4500 per month, but thats working tons of OT that is not always available. We make about 66,000 per year.

You realize that if you file still making OT and do go for the Ch 13, that will mandate you to continue the same level of OT for at least 3 to 5 years. Please, please speak with your lawyer about this. Given what you've shared so far, it makes a lot more financial sense to file Ch 7, let the house go in the bk to dump off the negative equity, and learn to live within what you make without OT.

Could I make a budget showing a particular amount of left over cash in order to qualify for the ch 13 enabling us to strip the 2nd mortgage?

See my comments above. You can make a budget - but is the budget based in reality and is it sustainable for 3 to 5 years? Don't get so blinded to what "might be" that you lose sight of "what is". It's the "what is" that you need to base your financial decisions on, not what "might be".

Now let me complicate it a bit more and say that as a result of the hardship withdrawals from my 401k last year our income has been elevated to the point that we owe the feds almost 1,000 and the state 500, yet we have no way except very small payment per month. Would this be included in the ch 13 payment plan?

It depends on the Ch 13 trustee's and the local bk court's practices. Some trustees and local courts allow repayment of 401K loans and their penalties, and some don't. To know what's allowed in your court, you need to ask your lawyer who is familiar with local court practices.

[spidge]

, see what happens when you ask to get kicked in the a**. Someone comes by and does it. Of coarse that was not what I wanted to hear but I was thinking most of it so thanks for your zest for the the obvious.
In response to your 7 vs 13 at the top of your post. Our situation has changed significantly since we first started our relationship with the attorney, so its kind of like starting over. I make a bit more money and the little woman now works, a little anyway.
The budget question was around taking advantage of the lien strip. Is there a target(minimum) amount of disposable income in order to qualify for a ch 13? If so There seems to be a bit of room to finagle that minimum out of my budget, minus the payment on the 2nd. So 165 is the number?
I hear you on filing using overtime included on my checks, but I generally get 1.5 hours OT per day. I have been working extra lately and adding every other Saturday for 8 more that I would like to drop completely. So even though my income shows that level of OT the budget I put forward would only include the 1.5 per day that is typical in my position.
In response to your realistic budget I must say that we have been living very inexpensively. In looking at the national guidelines I have been subjecting my kids and wife to poverty, but with a decent home.

Why keep the house? Good question. Still beating myself up on this one, but we have always planned to stay in it for many more years. It is centrally located to many opportunities within the company I work, and of coarse this is where the kids grew up. Mostly emotional.

[sadandconfus]

lrprn: I too am in the same boat. I want to strip the second. Even if that is possible I will still owe 311,000 on a house probably worth 200,000. I started wanting to do a bk7 and letting the house go but since my mom is a coborrower, people say that since the mortgage people can come after me they will come after my mom for the money. Now if I can do a bk13, I can save the house. what do you think?

[lrprn]

lrprn: I too am in the same boat. I want to strip the second. Even if that is possible I will still owe 311,000 on a house probably worth 200,000. I started wanting to do a bk7 and letting the house go but since my mom is a coborrower, people say that since the mortgage people can come after me they will come after my mom for the money. Now if I can do a bk13, I can save the house. what do you think?

There isn't enough information here in your post to make a determination of what might be best for you in the long run. Have you set up free initial consultations with 3-4 experienced bk lawyers in your area? If yes, what did they say? And if you haven't done this yet, it's time.

I don't know what your financial picture is, but if you are close to the financial edge just scraping by month after month even after stopping all your unsecured payments, then you are dangerously house-poor. Does this reflect where you are now pre-filing?

[spidge]

So, I would like to keep the house and eventually strip the 2nd.

Should I file a chapter 7, then after a period of time(?) file a ch 13 to strip the 2nd. I know this may raise some eyebrows of abuse but I am sure there is a way. I think its called a ch 20.

I owe the state of CA and the Feds taxes on this years return so should I pay those and get caught up on my 2nd before proceeding?

Any thoughts are greatly appreciated.

[walkthaplank]

House value 225,000.
1782 1st mortgage(interest only). Ballance 317,000
500+/_ 2nd mortgage(variable rate).Ballance 93,000
37,000 in CC debt, no payments since 8/07.
No car payments but the 2 we have are worth about 4,000 each.

I've gotta agree with lrprn here. Not only are you seriously upside down in your mortgage, but it is an interest only first that will never pay any principle. I am not a fan of giving up a house if you can avoid it, but wow this doesn't look reasonable. You don't want to kill yourself for the illusion of keeping a home you will likely never own.

As to the OT question, I work a HUGE amount of OT for parts of the year and then none for the part. The attorney's I have spoken with tell me that the the trustees in our area will factor in seasonal or irregular OT into the plan. Look at rentals and find out what the going rate is in your area. I'm fairly familiar with Mira Loma/Riverside/Corona/Ontario/ areas and $1500/mo will rent you a nice home in a good area.

If you can file CH7 and walk away from your home (probably to the next block over) and rent the same home for less money do it.

[spidge]

Ok folks, the reason I stated again that I want to keep the house is to help you get past that issue. If you add the tax advantage to having the write off it will ballance out a rental position and when I get through settling the debt and 2nd mortgage issue I can make full payments here and there.

So, should I pay my tax debt and catch up on the 2nd before filling a ch 7?

[biotechsolution]

So, I would like to keep the house and eventually strip the 2nd.

Should I file a chapter 7, then after a period of time(?) file a ch 13 to strip the 2nd. I know this may raise some eyebrows of abuse but I am sure there is a way. I think its called a ch 20.

I owe the state of CA and the Feds taxes on this years return so should I pay those and get caught up on my 2nd before proceeding?

Any thoughts are greatly appreciated.

The problem is the 'chapter 20' that you are talking about dissappeared with the 2005 bankruptcy law changes.

The problem is you are not eligible to file a Chapter 13 to receive a 'discharge' within 4 years after receiving a discharge in a Chapter 7. So if you can wait 4 years to file the Chapter 13 then you could strip the second lien. You can file what you call a Chapter 20 to catch up on arrears of a mortgage to paid in a chapter 13 plan or outstanding tax debt. But the kicker is the entire balance would have to paid during the chapter 13 plan since if you file before the 4 years have passed you wouldn't be eligible for a
discharge.

People have recently talked about file a 7 then filing a chapter 13 to strip a
2nd but I haven't heard of anyone actually being able to do it. The language is cut and dry about receiving a discharge after a chapter 7 discharge.

I would be very leary of an attorney telling you he can get a lien stripped in a 13 right after a chapter 7 discharge.

[spidge]

Biotechsolution, thank you for the constructive reponse. You were very helpfull and I appreciate that.