New to the BK Forum

[bleakhouse]

Hey folks,
I'm new to the forum and feel relieved to find a place where I can get advice from other folks who have been in similar situations.

Okay, here is mine:
I bought two rental houses in California during the boom while I was living in another state. I lost both homes to foreclosure. I had firsts and seconds on both homes.

I was sued in California by a law firm representing a collection agency for the second mortgage on the first home. The original loan amount was 50K and I was sued for 65k, which included interest and lawyer fees. I'm assuming it won't be too long before they get the California judgment validated in Illinois where I now live.

I haven't been contacted by a collection agency for the second mortgage on the second house. But the amount of this second mortgage is 100k.

So, I'm at least 165k in debt.

I'm trying to figure out whether debt settlement is possible (and better) or should I go straight for 13. I do not qualify for a 7.

I've used the values on the IRS website for the national and local standards and come up with a disposable income of roughly 1400 per month. Does anyone know if I should calculate these values for 1 or 2 people if I have joint custody of my kid?

I'm really down right now about this whole thing; any advice people might have will be greatly appreciated.

[LadyInTheRed]

Welcome to the board! Cheer up! You will get past this rough spot in your financial life.

Debt settlement may be a good option IF you can do it. Do you have a chunk of cash to pay in a settlement? You will need 10% at a bare minimum and most likely more. You will need to make sure both creditor's will settle before paying either one. Otherwise, you'll find yourself in bankruptcy anyway. You should also get in writing that your payment is settlement of the debt in full.

I tried a Google search for the household size question and didn't find anything definitively answering the question. It may depend on whether your kid lives with you more than 50% of the the time. I read one suggestion that you file BK on a day when your kid is in your home. Add this on your list of questions to ask when you have free consultations with 3 to 5 bankruptcy attorneys. It may depend on the local trustee.

[researchnerd]

Do you claim your kid as a dependent on your income tax? If so, I think you'll be OK including him/her on your BK documents.

[bleakhouse]

Thanks LadyinRed and Researchnerd. Just having anyone reply reminds me that I'm not alone out there.

I didn't put our kid on my tax return this year; we're thinking of alternating each year. So, 2011 would be my turn.

Any advice on how to begin negotiating debt? Should I hire a debt settlement firm? I hear they charge 25%-40% of the total debt. In my case, that would be 40k-66k just for their fee on top of whatever the debt holders agree to. I could easily be looking at $100k and possibly a tax liability through a 1099 for the remainder of the debt.

[bleakhouse]

Oops, sorry LadyintheRed for mis-typing your name. Loved the movie and love the name!

[researchnerd]

There is a ton of info here on debt settlement - do lots of research (ha, of course I'm going to say that) before going in this direction. It can be done, and in many cases is preferable to BK, but it takes a lot of time, effort, persistence and patience.

I would advise against a debt settlement firm, for reasons illustrated in the link above. They tend to be scams that can leave people worse off than when they started. You can do it yourself and your only cost will be time.