Deciding between 7 and 13

[njtrucker]

I have my first attorney meeting tomorrow and i want to be clear when I walk in.

Quick background. I have a 1st mortgage, $1960 a month and HELOC. The value of the house is around $490,000. The balances are 1st $370,000 and HELOC $180,000. The mortgage payment does not include tax and insurance. The taxes are another $960 a month.

I have unsecured debt around $175,000. I have my own business and it is probably going to fail and stupidly i tried to save it using personal credit and that is how i got into my mess.

We are right around the median income, just about $750 over it, but if my business closes and I have a job offer which would put us well below.

Based on the actual numbers for the mortgage and taxes, they are above the standards, and using the standards for the rest of our expeneses, we have about $250 a month DMI.

My questions are, can we use actual costs for our mortgage and taxes? Also, with the amount of unsecured debt, can we file 13 with that little of amount ot be repaid? I thought i read some where that if your unsecured debt was over a certain number, you did not qualify for 13.

We want to keep our house and if we get rid of our unsecured debt, we can afford it with the changes we have already made in our life style.

One more wringle to this, i have a lawsuit pending which I know would be gone under a 7, so really want to go 7, but i am not sure i can.

Thank you for any advice.

[HHM]

Let's back up and talk about the house and your income.

How much do you make per month. In your heart of hearts, unless you are median income for a family of 6+, that is too much house.

Right now, its sounds like you will be a chapter 7 AND you are walking from the house.

[njtrucker]

Our gross income is about $7500 a month.

If i go 7, cant I reaffirm the mortgage and keep the house? As i said before, I can afford the house if I get rid of all of the unsecured debt I racked up with my business.

[woeisme]

I think what HMM is getting at is that with almost $2000 from your 1st mortgage, another thousand in taxes/insurance, and the unknown amount of your HELOC, your house payment is probably going to exceed 35% of your take home pay, which is not a good thing. You said your monthly income is $7500, so I'm guessing (because I dont know the amt of your HELOC payment) that you are spending about 50% of your income on your house, and then you say you are planning to take a lower paying job soon, which will make this % even higher.... so HMM is just trying to get you to think about whether or not you really want say 60% of your income going to your house after filing?

Whether you can go 7 or 13 really depends on passing the means test, otherwise CH 7 isn't an option. Get a good lawyer who will help you plan your BK so you can file CH 7. If your income and your expenses work out to having no disposable income, then you can file CH 7, so you need to "work" these numbers by waiting 6 months after going to lower income, making sure that you claim every allowable expense, etc. You don't have to lose your house with a CH 7 if you are up to date on the payments, unless you have a lot of equity in it that you can't pay (at least that's my understanding, I'm CH 13 so not so sure on rules for a 7). From the mortgage and the HELOC, I don't think that's an issue.

[njtrucker]

My wife has a standing offer to go back to work with a company and i negotiated my offer to be less for now and after we file i will get a raise, so our income level will be back to where it was when we bought our house and before I made a bad business decision which is where most of our unsecured debt comes from. So it may look bad now, but a few months after we file, we will be in good shape.

[njtrucker]

Another question, this may not be able to be answered in this forum. If i qualify for a 7 and want to keep my house and can show that it fits my budget with no to very little DMI, can they tell me i cant? I have negative equity.

I cant wait for my meeting with the first attorney tomorrow, it is driving me crazy not knowing this stuff for sure.

[Kkole425]

After meeting with my attorney it seemed to me that you or we really don't decide which to go into. It is pretty clear one or the other. Maybe that is because we don't have a job right now. When I left my attorneys office I thought I understood everything and then reading the board the last few days now I am back to wondering. I think my understand is there is no WHAT IFS. I went in with a 100 what ifs and the attorney said it is what it is. You go buy the numbers. You get to keep what you get to keep and you give up what you give up. It is very by the law. No way to get around 7 or 13. I wanted to do a 13 and try to keep some stuff. Even with a good job he said that we could not do that because alot of our debt was business debt and there is no business anymore. I hope it works out for you and you can get a clear understanding. I guess I am kinda learning that every case is different but the laws are the laws. Doesn't mean every state law is the same. Get everything together before you go so there is no questions with the numbers and then they can pretty much tell you with in 15 minutes of you meeting. Now I am thinking in my head well maybe just the attorney I saw, maybe he is no good. Maybe I need to quit reading posts til I have all my paper work filled out so then I can only think about my case and not wonder in someone else case would be the same as mine.

[njtrucker]

Thanks. I am not worried about keeping any of my personal property in a 7. In NJ you can use the federal exemptions and it gives me more than i own in property.

My biggest concern is the house. We love our neighborhood and dont want to lose it. I am also concerned that alot of our debt was done to try and help my business and I did not keep my wife up to date and she had no idea how far i got us in debt. Now i also have some business personal guarantees that are really pushing me into this.

I think once i pick an attorney and start the process, i need to stay off these boards for awhile also.

[HHM]

Yep, my question is not whether you "can" keep the house, but whether it financially makes sense to do so?

In a chapter 7, bottom line, if you can make ALL the payments associated with the house, 1st mortgage, HELOC etc, you can keep the house, (so long as the equity, if any, does not exceed your state's homestead exemption).