Home Loan Mod While in CH 13

[ConfusedinOC]

My salary has been reduced by about 14% just recently and I see no end in site in regards to ever paying my credit card debt. I currently make the mandatory min payments but am using the cards on a monthly basis. In essence I am barley lowering my total balance.

My current home loan is a pay option negative amortization. My rate is 4.5% and the min payment is $2500 (which amounts to the interest only poriton)but the amorized payment is $3400 (principal and interest). The loan can recast if I go 15% over my principal loan amount or on May 2011 whichever comes first.

First:
If I file now which payment would be entered in the means test? The current min that I pay or the amortized payment that includes principal and interest?

Second:
If during my CH 13 repayment my interest goes up on the loan (which could happen on a monthly basis) could I readjust my repayment amount?

[lrprn]

Welcome to BK Forum - glad you found us!

It would help us help you better if you could share some additional information with us:
- Which state do you live in?
- Why do you want to file Ch 13?
- Are you filing alone or with a spouse?
- How many people are currently living in your household?
- Looking back the last six calendar months, how much gross income from all sources did you make? If you are filng with a spouse, how much did they make from all sources over the last six months?
- Do you want to keep secured assets when you file? If yes, which ones? (House, cars, other property?)
- If you want to keep assets, what is their current financial state? Are the loans for each up to date or in arrears? Are any of the assets paid off in full? How much equity do you have in each asset?

If you can provide these answers, we'll do our best to help you sort things out.

And the answers to your two questions are:

First: If I file now which payment would be entered in the means test? The current min that I pay or the amortized payment that includes principal and interest?

If you file now, you enter the payment that you are paying on the day you file. However, if your lawyer knows your payment is going to increase in 2010, then he/she can write the increase into the plan.

Second: If during my CH 13 repayment my interest goes up on the loan (which could happen on a monthly basis) could I readjust my repayment amount?

Anytime income or expenses have a significant and permanent change during your 13, your lawyer will work with you to create an amended 13 plan and file it with the court. Your trustee will look it over and hopefully confirm it. Then your payments change to adjust to the changed financial circumstances.

However, it's not realistic to file an amendment every month. You have a horrible mortgage loan....it's going to make completing a 13 successfully difficult.

As you have your 3-4 free initial consultations with lawyers, bring up these circumstances and see what the lawyers have to say. We'd love an update about what you're told. Hang in there - it's always darkest as we realize we are in serious financial trouble. Keep posting - we'll help whenever we can.

[ConfusedinOC]

Which state do you live in?
CA

Why do you want to file Ch 13?
With rising credit card rates and a looming recast of home loan in May 2011 I don't ever think I will pay off my credit cards.


Are you filing alone or with a spouse?
With a spouse.

How many people are currently living in your household?
Three (wife, son and myself) but I can claim my parents that live in a seperate home while they collect social security and do not have to file income tax.

Looking back the last six calendar months, how much gross income from all sources did you make? If you are filng with a spouse, how much did they make from all sources over the last six months?
Wife: $7833/month
Myself: $7220/month

Do you want to keep secured assets when you file? If yes, which ones? (House, cars, other property?)
House and 2 cars

If you want to keep assets, what is their current financial state? Are the loans for each up to date or in arrears? Are any of the assets paid off in full? How much equity do you have in each asset?
All are current with no equity.

[lrprn]

Thanks for the answers, Confused! Let's see.....

How many people are currently living in your household? Three (wife, son and myself) but I can claim my parents that live in a seperate home while they collect social security and do not have to file income tax.

You can't claim your parents in your family size unless they are actually living in your household.

Looking back the last six calendar months, how much gross income from all sources did you make? If you are filng with a spouse, how much did they make from all sources over the last six months?
Wife: $7833/month
Myself: $7220/month

So your wife makes about $94K gross and you make about $87K gross. The median income for California for a family of three is $70,684 - see http://www.usdoj.gov/ust/eo/bapcpa/2...come_table.htm . Together you are way over that, so it's 99% likely you will have to file Ch 13.

Do you want to keep secured assets when you file? If yes, which ones? (House, cars, other property?)
House and 2 cars. ... If you want to keep assets, what is their current financial state? Are the loans for each up to date or in arrears? Are any of the assets paid off in full? How much equity do you have in each asset?
All are current with no equity.

With no equity in anything, then it's very likely that one of the two CA exemption systems will protect the house and cars - http://www.thebankruptcysite.org/exe...alifornia.html . You can use one or the other system - no mixing allowed.

Also since you are filing together with your spouse, living in a community property state won't matter in your case.

You didn't share how much unsecured and secured debt you are carrying (and I didn't ask ) Currently, you can only file Chapter 13 if your total unsecured debt is less than $307,625 and/or your secured debt is less than $922,975. Is your debt under these limits?

If they are, then you both are well-positioned to be able to file Ch 13 and get some relief from your unsecured debt.

It's time to set up 3-4 free or low-cost initial appointments with experienced bk lawyers in your area. Also if you haven't already, it will help immensely if you do some intensive research to understand Ch 13 and how it works. The forums hers are full of "real life" information, plus these websites give a good overview as well:

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter13.html

http://moranlaw.net/13workings.htm#C...013%20practice (Cathy Moran is a well-respected CA bk lawyer so her CA-specific information will be particularly helpful for you)

If you are a reader, then there's an excellent book about Ch 13 from NOLO for $27.99 + tax (or download for $23.99) at http://www.nolo.com/product.cfm/Obje...1/213/161/129/

Please keep posting questions - we'll help you sort things out as best we can.

[ConfusedinOC]

Currently owe 150k in credit, 630k in home and 80k in auto.
Problem is that parents did credit card balance transfer to pay some of our credit debt (they had better rates). We have been paying the debt but in a CH13 I'm assuming that I will not be able to continue to pay parents credit card payment.
Could I do balance transfers from my cards to pay parents cards? We own a vehicle (valued at 14k) that parent has been driving and insuring for 4 yrs. Can we gift the car and transfer titile to parent? We also own two jet skis (valued at 14k) can we transfer title to parent and write something up stating that it is for payment of the money we owe them? I think I might end up filing next August.
Thanks for all the valuable info and reply.

[ConfusedinOC]

Would wedding bands and rings (if over the exemption amount) be taken away?

[lrprn]

Currently owe 150k in credit, 630k in home and 80k in auto.

You are under the debt limits to file Ch 13 - that's good.

When you say "80K in auto", is the loan for the car $80K? (gulp!) Do you mean the car is worth $80K? Do you have a loan for the car? Is there equity in the car? Or is this more than one car?

I'm assuming that I will not be able to continue to pay parents credit card payment.

If you have a legitimate, witnessed written agreement with your parents to repay the 'loan', then it is possible to include them in your plan like any other creditor. Discuss this during your free initial consultations.

If you can include your parents as creditors, then whatever your plan doesn't pay them back, you can pay back in full during or after your plan.

Could I do balance transfers from my cards to pay parents cards?

This is a bad idea. Your parents are insiders and you are opening the door to the cards objecting to the transfers if you file within 90 days.

We own a vehicle (valued at 14k) that parent has been driving and insuring for 4 yrs. Can we gift the car and transfer titile to parent?

DO NOT DO THIS!! Any asset transfers within a year of filing can be unwound by your trustee and the car seized, then put up for auction.

We also own two jet skis (valued at 14k) can we transfer title to parent and write something up stating that it is for payment of the money we owe them?

Do not do this either! See above - this is an insider transfer and the jet skis can be seized by your trustee and sold.

I think I might end up filing next August.

You have time to plan this out then. Because you are a high income filer, be sure to interview at least 3-4 experienced bk lawyers who frequently file Ch 13s. Ask all the questions you've been asking us here. By the time all the interviews are done, you'll have a good idea about which lawyer is going to represent your interests the best. And you'll learn a lot about what's going to possible and what isn't if you file Ch 13 too.

[lrprn]

Would wedding bands and rings (if over the exemption amount) be taken away?

If the jewelry has value significantly over what your exemptions will protect (like at least $1-2K over), then yes, it's possible that your trustee might take them.

We had a forum moderator here a few years ago who had her wedding rings taken by their trustee when they filed Ch 7. Terrible situation However, I do believe that most trustees understand the emotional value of wedding rings and won't go after them. Other jewelry is fair game though.

Before you file, have a trusted jeweler estimate their value - *NOT* for insurance purposes, but ask what you can realistically get if you put the pieces up for sale. This is the value you want to use on the bk forms. This will also tell you if your jewelry can be protected by the California exemption system used when you file.

And fyi....before you file, you can sell any jewelry that will not be protected by your exemptions as long as you get fair market value for it (hint, hint ) Ask the lawyers you interview about this too.

[ConfusedinOC]

The 80k is for two cars being financed with negative equity and hoping to keep during CH13.
So if I keep the skis and auto that are paid for what happens to them? Can I keep them if my repayment plan pays the value thru Ch13?

[lrprn]

The 80k is for two cars being financed with negative equity and hoping to keep during CH13. So if I keep the skis and auto that are paid for what happens to them? Can I keep them if my repayment plan pays the value thru Ch13?

Please forgive me, but I have to say something that may be hard for you to hear.

Jet skis are just things. Expensive cars that you owe more on than they are worth are also just things. Things can eventually be replaced. What's important about this fresh start is that you and your family will no longer be stressed, sad, and upset battling constant financial problems. Dragging along unnecessary things that make your recovery harder isn't the best way to go.

Bankruptcy needs to be a cold, hard financial decision, nothing more. It's way too easy to get emotionally tied up in our "stuff" and lose sight of the true goal - getting out from under a mountain of debt and getting a fresh start.

Dragging along old 'stuff' that is nice to have but creates continued unnecessary debt after filing makes no financial sense. It's an emotional reaction. Think seriously about letting go of whatever doesn't contribute to a fresh start and zero debt. You'll have a much easier time during and after bankruptcy if you use your Ch 13 wisely.

Now to answer your original question - what happens if you keep the cars and skis depends on how much equity is in each asset and how much your CA exemption system can protect. You can see if your trustee will set up a payment plan within your Ch 13 to pay off the unprotected amount in full by the end of your plan. However, you need to understand (1) this will increase your monthly payment plan significantly, and (2) that the trustee does not have to do this. He/she could seize the items instead and sell them (although that's not likely if you are willing to pay to keep them instead).

Again, this is not making a new financial start. But what you do is really up to you. Discuss the options with your lawyer, and at least consider letting go of what will continue your old debt patterns.

[forgotten]

You didn't share how much unsecured and secured debt you are carrying (and I didn't ask ) Currently, you can only file Chapter 13 if your total unsecured debt is less than $307,625 and/or your secured debt is less than $922,975. Is your debt under these limits?

It is actually $336,900 for unsecured debts and $1,010,650 for secured debts, as of April 1, 2007.

I am on top of that as my petition was for $332k unsecured.

[lrprn]

It is actually $336,900 for unsecured debts and $1,010,650 for secured debts, as of April 1, 2007.

I am on top of that as my petition was for $332k unsecured.

Thanks for the correction, forgotten. Mine are the old pre-2007 figures - appreciate you catching the mistake!

[ConfusedinOC]

I understand where your coming from. But aren't I allowed to continue to pay the two cars that I currently make payments on while in CH13 and are to be paid off while in CH13? And aren't these payments part of the monthly expenses? If I were to let go of the two cars then I would have nothing to drive while paying more to the repayment plan.

[lrprn]

I understand where your coming from. But aren't I allowed to continue to pay the two cars that I currently make payments on while in CH13 and are to be paid off while in CH13?

Yes, you can keep both cars and make their payments through your Ch 13 plan for the life of the plan if that's what you want to do. Your trustee will get his/her administrative fee % on top of each car payment which will increase your monthly payment a bit.

And aren't these payments part of the monthly expenses?

Auto loan payments are a legitimate expense. However, the bk law limits how much the payments can be. Your trustee can object if he/she thinks the payments are not "reasonable".....and what's "reasonable" is decided by each trustee.

If I were to let go of the two cars then I would have nothing to drive while paying more to the repayment plan.

Since your cars seem to be pretty expensive, this will limit your options somewhat.

Some Ch 13 filers in your situation will sell one of the cars for fair market value well before filing, pay off the loan, then use the leftover cash to buy a less expensive car outright. The key is that the second paid-for car plus the first "under the water" car need to end up under the allowed auto exemption for your state. This protects both cars and also saves a bit because then your trustee is only making one car payment for you rather than two. Just a thought....

Your Ch 13 lawyer will be the best judge of what's going to produce the best long-term outcome in your unique financial situation.