question about mortgage and funding a Ch 13

[waldo05]

Hello everyone,

I had a quick question about a mortgage in Ch 13. We have no interest in keeping our home (240k and worth 130k now) we will be able to rent for about 500 less a month same house, same area and wanted to know if we file for a 13, is there a way to just give up the house. I also ran the numbers on our unsecured debt (about 80k in cc), with the current interest rates and minimum payments, it would take considerably longer than 5 years to pay it off. We are just barley getting by (and are almost going backwards) with the minimum payment game and wanted some advice/suggestions on if anyone has chose to do a 13 with 100% payback in order to get rid of the debt in 5 years? If you are in a 100% payback plan, are you able to get an extra job, buckle with purse strings and try and pay it off early? What happens to our student loans during a BK (I have exhausted my forbearance)? Can they be put back into forbearance and then I could use that money to try and pay down the 100% plan? If you are in a 100% payback plan, is there less scrutiny with additional income we receive? I am trying to figure out what is best here, and if we can convert what we have been paying on the minimums to go toward just principal, I think it may be worth filing. Also, if you are in a 100% payback, does it matter how much cash you have your checking account at the time you file? Thanks in advance

[SMinGA]

Generally student loans do go into forebearance while in ch. 13. I believe that is based on the automatic stay...

If you are in a plan to pay back 100% to unsecured, then your assets (cash in checking as an example) should not be an issue. The general rule is that unsecured get at least the value of your non-exempt assets.

My understanding is that in 100% payback plans, you can pay extra/early to pay off. Specifics would depend on your district & trustee.

[waldo05]

in a 13, is there a way that we can "give up our home?" We are so far underwater it isn't a sound financial decision to keep it. thanks

[SMinGA]

Yes. Though you would then probably not end up in a 100% payback, since the balance owed after the house sold/foreclosed would become unsecured debt. But at the end of the plan, anything remaining would be discharged.

Many people file ch. 13 to 'save' the home, but that is not a requirement.

A quick question though: Do you have just a 1st mortgage, or also a heloc/2nd mortgage? If the home is worth less than the 1st, then some file ch. 13 to 'strip' the lien from the 2nd. The 2nd mortgage balance becomes general unsecured debt.

[waldo05]

we just have one loan, for 240000 and is worth about 130K now. What about forclosure? I have also considered stop paying the mortgage and saving that extra money and maybe settle w/ the cc companies for less. I have stopped paying my cc, but wife has not. Owed WF 9000 and they sent a letter after 1 month of being late saying that they would settle for 6600 by May 18th....

I am in a bind here and am trying to figure out my best option....thanks for the help

[walkthaplank]

Yes you can give up your home in a CH13. The amount you owe after the bank has recovered from selling the home will be added to your "unsecured debt"

Your payback percentage will be based solely on your Disposable Monthly Income (DMI). That would be based on all of your income less allowed deductions/expenses. Whatever that number is will be the amount you pay monthly over the course of your plan's life. Don't worry about payback percentages, it really is irrelevant to you.

If you are planning on walking away from your house, yes you could stop paying the mortgage and live there for several months (if not longer). If you pay off your credit cards with that money, you still might may end up owing for the foreclosure sale deficiency and tax liabilities from settling your debts ending up in a worse situation. If you walk away from the house in BK, that deficiency amount will be added in with things like credit cards and payed off based on your DMI. Any remaining balance at the end of the plan will be discharged. Dealing with your debts through BK leaves you with no tax liabilities.

If you are considering BK as an option, the best thing you can do is set up appointments with attorneys in your area and see what they have to say about your situation. Stop using credit cards and start figuring a way to live on a budget. I have been in my plan for almost 7 months now and it has been challenging. Over the last four months we have had our washer, dryer and a laptop die. We are also looking at some major car maintenance over the next year. Nothing ever goes wrong at convenient times So far we are surviving.

[walkthaplank]

Forgot to add, having your home foreclosed on outside of bankruptcy is an additional hit on your credit, same thing for settling your unsecured debt. If you do it all in BK, not only do you save on the tax liabilities, it is actually a little less damaging over the long haul for your credit (if that matters to you)