Am I making a big mistake with a Chapter 13

[jtallerie]

My monthly income is about 3069.00 a month right now. I am behind on my mortgage 7 months, $2100.00 per month. I stopped paying my cc 3 months ago I owe 22,000. I have a tax lein of 4500.00, and a 6500.00 lein on my house for unpaid HOA fees.

I bought my house in 2006 for 325,000 & I put 65,000.00 as a down payment. I owe 256,000 on the house it is now worth about 210,000.

I never thought I would be in this position (job loss, underemployed etc.) My income was higher when I bought my house and I was able to afford it at the time. I always thought that if things got too hard at sometime in my life I would be able to sell the house. Since it is upside down I can't. I am having a hard time keeping my utilities on and buying food for my family.

I turned in paperwork (bank statements, pay stubs etc.) to my lawyer yesterday for a Chapter 13. I have been reading that I would have to pay about 600.00 a month to the Trustee. I don't have that much money. After paying for food,car insurance, electric,water etc. I really don't have any money left. I was thinking that if the payments were about 200.00 per month I could try to get house cleaning jobs to do on my days offf, to try to bring in more money.

We never go out to eat or go to the movies I don't have anything else left to give up or cut back on. I cut coupons, I rarely even splurge on cookies or cake. I stopped going to birthday parties b/c I cant afford gifts.

Will my plan be rejected? I was under the impression that my mortgage arrears would just be put on the back end of my mortgage. Should I be filing Chapter 7 and losing my house? I exausted my 401k, I have no savings. I lost my health insurance and life insurance.

When I told my lawyer I wanted to keep my house he said I could do Chapter 13 and keep my house. He also said that I would pass the means test for Chapter 7. He has not told me how much I would have to pay the Trustee in a Chapter 13.

I am soooo confused!
I don't understand how all this works!
Can anyone give me advice?

I live in Florida.

Someone please help!

Thanks for listening!

[debtinohio]

In a 60 month plan $245/month alone will be needed for mortgage arrears. Doesn't appear you have the income to afford $2100 for the house + the arrears + the rest of the chapter 13 payment (fees).

Unless you expect a drastic income increase sometime soon your best bet will be to file 7 live rent free in your current home as long as possible and save as much as you can and get a nice lower-priced rental and take care of your family.

Oh yeah...

eat more cake, life is short :-)

[researchnerd]

If you can pass the means test for Ch7, I think you should give it serious consideration. If you go with Ch13, the arrears on your mortgage will be included in your payment, but you have to stay current on your payments going forward. Even if you could pay just $200/month for the Ch13 plan, after paying your mortgage you would still not have enough left over even for groceries. I suspect you'd find it almost impossible to get a trustee to approve that.

The bottom line is that your $2100 mortgage is nearly 70% of your take-home pay, which is simply unsustainable over the long term. What are the chances you could find something livable for about $900/month? It is a renter's market and there are a ton of affordable homes out there, and in this economy they frequently don't even check your credit.

I know it's hard - we were in a similar position due to DH's unemployment, and we cut back on everything we could. We didn't go out to eat (even fast food) for almost a year. It sucks living like that, but we were trying to save our home at the expense of everything else. Like you, we burned through our savings, and we maxed out credit cards too. We kept thinking DH would find another job "any day now", but after almost 2 years we concluded that we had to walk away from our beloved home so we could have a life. In just a few weeks, we found a nice rental house for less than half what our mortgage payment was. It hasn't been easy, and we still have a lot to sort out, but I started sleeping better the first night we moved in.

[SMinGA]

In a ch. 13 priority debt is paid over 36-60 months. Priority debt would include the mortgage arrears, taxes, and I think even the HOA dues but I'm not 100% on that. Assuming you paid your atty in full/up front, to pay off the 7 x $2100 arrears & $4500 tax lien over 60 months would be $320. A little more actually as there are probably late fees on the arrears. If the HOA is priority, then its up to $429. And the trustee takes 5-10% (depends on the district) so that could mean a bare minimum of about $475.

[jtallerie]

From the replies it looks like I wont get approved for a Chapter 13. I wonder when the lawyer will tell me I won't get approved. Will the lawyer tell me? Or will I end up with my case dismissed? Does anyone know how this works?

Thanks for listening and writing back I really appreciate it. I feel like I don't have anywhere else to turn.

[researchnerd]

If the lawyer is any good, he'll have some idea of what your chances are of having your plan approved. He should also be able to answer any questions you have about the process. If he doesn't, I'd suggest finding a different attorney with more experience.

In the meantime, you may want to check out this book: The New Bankruptcy: Will It Work For You? It has a ton of information and is written in a very straightforward manner. You might be able to find it at the library.

[jtallerie]

Thanks I will check the library and see if they have it. As far as the lawyer goes I had to borrow the money to retain the lawyer. I just hope it will work out.