Savings and Moving

[madbuda]

My wife and I have met with our BK attorney and we are planning on filling chapter 13 in about 6 months. We are planning on surrendering our house and moving into a rental that is more suited for our family.

The reason for waiting to file is to try and short sale my house or let the bank foreclose on it.

The question is if I save the money that I normally would be paying out (aprox $1400 a month) to pay for moving expenses, rent, and deposit will this cause an issue during filling?? Also if we have some money left over after paying for this (guessing 2-3k) would the trustee take it from us.

We don't have a huge amount of debt, and could afford monthly payments had we not gotten behind.

FYI I did do some searching and browsing around and didn't come up with anything that really matched our scenario very good

[secondtimer]

Consult your attorney.
Generally the trustee will use money that's not exempted for plan payments.
Also the trustee will watch for any preferential treatment of creditors.
There's alot of good info here. You'll need to browse for it.
Good luck to you and yours.

[BuckeyeGuy13]

If you're going to file and surrender the house, why bother with a short sale? That would be two hits on your credit AND you're in the same situation as if you just include it in the BK.

In my opinion, it's a bad move. Just include it in the BK and move on.

[madbuda]

After some reading I agree that I shouldn't even bother with the short sale. Now my other concern is saving money prior to filling.

Wil it cause an issue with the BK if I bank my house payment then use that money to move. Also if I have an emergency fund is it possible to protect it?? I can always just save some cash to be on the safe side.

[lrprn]

After some reading I agree that I shouldn't even bother with the short sale. Now my other concern is saving money prior to filling.

Good. This is the right decision given what you've shared about your situation.

Wil it cause an issue with the BK if I bank my house payment then use that money to move. Also if I have an emergency fund is it possible to protect it?? I can always just save some cash to be on the safe side.

It can cause an issue if you file and can't protect that much cash with your state's exemptions. Some states allow very little cash to be on hand at filing. Unprotected cash can be taken by your trustee.

Before doing anything further, I encourage you to meet with at least 2-3 more experienced bk lawyers in your area. Run this situation by all of them plus discuss it with the lawyer you've already met with. That's how you'll see what your best options are and how to best deal with when to stop house payments if you intend to surrender.

Two questions for you - if you are surrendering the house, are there other secured assets you are trying to keep that you would lose if you filed Ch 7? Do you qualify to file Ch 7?

[madbuda]

Two questions for you - if you are surrendering the house, are there other secured assets you are trying to keep that you would lose if you filed Ch 7? Do you qualify to file Ch 7?

No, my house is the only secured asset I own. I have aprox. 30k in unsecured debt.

I do not qualify for Ch7 due to income (very close)

I almost wonder if it would be better to not do the BK and just pay off the debt and foreclose on the house... just gotten a few months behind and no one will work with me, they all want payment in full. My BK atty tells me he can get my payment to be around $350 which give me allot of breathing room, my income forces me into a 5yr not a 3yr.

[madbuda]

Curious if I am not paying on my house and plan to give it up in the Chapter 13 would my mortgage still be counted in my budget?? or would I just put down what I estimate what I expect to pay in rent?

Also does anyone know about deficiencies in a chapter 13?? would I still be liable in Michigan for the difference of the sale price and mortgage??

[lrprn]

Curious if I am not paying on my house and plan to give it up in the Chapter 13 would my mortgage still be counted in my budget?? or would I just put down what I estimate what I expect to pay in rent?

Whether surrendering your house after you file still allows the mortgage to be counted in your expenses depends on the case law in your state or bk district. Your lawyer can tell you what to expect here in your situation.

Also does anyone know about deficiencies in a chapter 13?? would I still be liable in Michigan for the difference of the sale price and mortgage??

If you file first and then surrender your home back to the lender, you are NOT responsible to pay whatever is left on your mortgage. Even if your lender then sells the home at a foreclosure sale for much less than it's worth, you are still NOT responsible for paying the difference.

[madbuda]

If you file first and then surrender your home back to the lender, you are NOT responsible to pay whatever is left on your mortgage. Even if your lender then sells the home at a foreclosure sale for much less than it's worth, you are still NOT responsible for paying the difference.

Thanks, that is what I was most worried about. My Lawyer emailed me back and tells me we will budget in an estimated rent payment.

Knowing I am going to file in May should I continue to pay on credit cards that are now current?? or just bank everything I can to pay for moving etc.??

Also I have a temporary increase in my income from work, this is stated as so on my paystub, it will go away in June. Would this still be classified as income??

Thanks allot for all the info, it truly has helped us feel more comfortable with the whole situation.

[madbuda]

got the answer on the temp pay increase from the lawyer, income is based on the last 6 months.

Does the redemption period get cancelled if I surrender the house in a 13??

[SMinGA]

Check your state's exemptions for liquid asset or wild card exemptions. Some states allow you to use part or all of the 'homestead exemption' as a wildcard if you are not using the homestead exemption to protect equity in a house.

[madbuda]

Thanks, I still am curious on the timing of things, if we surrender the house in the bk how long would we have till we have to move?? would it follow the same procedures as a foreclosure?? would the trustee set a time for us??

Thanks

[justbroke]

Thanks, I still am curious on the timing of things, if we surrender the house in the bk how long would we have till we have to move?? would it follow the same procedures as a foreclosure?? would the trustee set a time for us??

I want to give you a timeline, but this is dependent on several factors.

The first factor, is your State foreclosure guidelines. This can vary from 90 days to 18 months! How your particular State drives foreclosures and whether it's by Judicial or Non-Judicial (power of sale) can make a huge difference. Also, any "redemption" period could mean more time in your home.

The second factor is whether you were already in foreclosure at the time you filed Bankruptcy. In some States, if the lender files the motion for relief from stay in the bankruptcy, the foreclosure continues exactly where it left off! That could mean a foreclosure sale days after the relief from stay is granted.

The third factor is the X-factor... the Trustee. Some Trustee's don't care if you stay in the home. Others will literally try to force you to "take action on your intentions" by abandoning and vacating the property! Whether this is a practice in your District is specific to your Trustee and District.

So... it depends! Anything from 90 days to 18 months is common. The factors listed above have great impact on this.

[madbuda]

I am timing the filing so it falls just prior to when the bank will be able to begin foreclosure. Based on state law and my situation I have a 6 month redemption period.

Provided I don't fall under the X-factor would it be safe to say I would have 6-9 months?

My lawyer stated that filling prior to foreclosure proceedings would delay the process by 1-3 months.

Thanks to everyone that has helped me out here, it is nice to be able to talk freely about this subject as it is normally taboo to openly discus bk and foreclosure.

[justbroke]

If the foreclosure process had not begun, yes, the Bankruptcy "might" delay it by as few as 45 days, and by as many as 90 or more days. Then the State foreclosure process would begin (or continue). This could mean an additional 90 days on top of the foreclosure process for your State. If your State has a post-foreclosure "redemption" period of 6 months, I would say you have a minimum of 9 months with the built in delays caused by the bankruptcy.