It's time.

[SMinGA]

If you are certain you will file, and do not want the boat, stop paying. Whether it gets repoed now or you surrender it later is not relevant and the deficiency balance becomes unsecured debt in your plan. Except instead of $14k, more like $18-20k because it will sell at auction for less than its worth. Some would say to avoid a repo on your credit, but by the time you come out of BK - a 5 year old repo would have a minimal impact (if any) on your score. If you keep paying now and ultimately let it go, the money you have paid is just wasted and gone. Whether or not you'd be allowed to keep it thru a bankruptcy - would depend on your district, trustee, etc. Most would not see a boat as a necessity, but if you're paying high enough % to unsecured it might not matter. I'm not sure if a boat loan can be crammed down though.

If keeping the house is a high priority - perhaps also look into modifying or adjusting the loan terms so that you pay more than interest.

Wow, thank you for all the advice. Our #1 concern is keeping our home. It's a small house, and certainly nothing luxurious (only 1200sq/ft, built in the 40's). It makes me nervous playing with the mortgage like that although I see the logic. I suppose an initial consultation with an attorney is in order so we can make plans before filing.

With the boat, what happens if we keep paying the loan on time and enter bankruptcy? I'd much rather see it go, and wish I could just sell it now. Perhaps we should just stop paying and let it get taken. Can they initiate a lawsuit, as the boat is worth only 50% of the loan value?

[NYHusband]

Scheduled first (free) counselling session through credithelpny.org - hopefully it's legit? We can't do the pre-bankruptcy counselling until we meet with them and we go over a debt management plan of some sort.

Would a DMP be a legitimate option?

[SMinGA]

My honest opinion: you might not see much different from what you're doing now. DMPs are good for people who have fallen behind, getting hit w/ late & overlimit fees and had their rates jacked to the max but are now able to make regular payments. But in that situation, its hard to catch the cards up - and they keep adding those fees each month. The DMP stops the fees, the accounts are re-aged to current and rates are reduced to 6-9% on average. Payment should be about 2%-3% of the balance.

You may do better to contact the creditors directly - ask for hardship or temporary arrangements where they reduce or even eliminate the interest rate for some period of time. I know of one person who accomplished that on a couple of her cards - reduced to 0% apr to be paid in full over 5 years.

Scheduled first (free) counselling session through credithelpny.org - hopefully it's legit? We can't do the pre-bankruptcy counselling until we meet with them and we go over a debt management plan of some sort. She just settled one major creditor/balance @ $4.5k on a $12.5k balance (401k funds) and is attempting to do teh same with the last few. Between the 0% paybacks and 30-40% settlements, she is no longer looking at ch. 13. (Would have been a fairly high payback plan.)

Would a DMP be a legitimate option?

[NYHusband]

Update:

We have our 2nd attorney "interview" tomorrow. The first one is supposedly the best in the area, but just kept rolling his eyes and shaking his head when looking over our paperwork. We KNOW we're a mess, that's why we're in your office! Hopefully the next try will get someone that won't roll their eyes and will actually answer some questions.

** Oh and get this one! The first "very respected" lawyer told us to get our home appraised and handed us a card for his favorite appraiser. When he gets there, he asks for 1st and 2nd mortgage values, name of lender for both, and what our intentions are (show no equity or actually strip the 2nd). I said we didn't know where we stand on value, and we're going to have our lawyer review the numbers. The assessor then informs us that the bank that holds both our mortgages is his #1 customer (pre-mortgage valuation stuff) and that he can give us a value on the low side, but it will not be less than the 1st even if the house is worth less because it's a conflict of interest. THANKS Mr. Lawyer for making us waste $150, AND having the banks' own appraiser find out that we're looking at BK.

Anyway, we've been budgeting and number crunching constantly trying to figure out what we should do.

Recap:

Wife: $96,000 income
Me: $61,000 income

Unsecured: $108,000

1st Mortgage: $146,000
2nd Mortgage: $50,000 (Interest only payment, balloon in 16 years)
Home Value: Right around the value of the 1st - probably not able to strip

Car 1: $430
Car 2: $350

Boat: Owe $28k, worth $14k - willing to keep or voluntarily repo - payment $425, 8 years left

Now - I've crunched numbers over and over. Obviously we'll be in a 60 month ch13. Here's where I have MORE questions! (I love you guys!)

If I were to up and quit my job, planning to be a stay-at-home dad (kids don't exist yet, but we'd like to have one soon - getting older), I don't think it would change anything except the amount the unsecured debt holders would get. Basically, my income would be 100% payment - I think. I did a means test based on all our expenses with just her income, and we still qualified for a 60 month ch13 and there was still a decent payment going out to the credit cards. Basically, we get hit HARD with taxes having two substantial incomes. If one goes away, the tax bracket changes. So her take home substantially increases, which keeps it a 60 month ch13 with creditors getting decent payments.

Should I use this as an opportunity to A) go back to school part time towards a masters and B) stay at home with potential children (as we have no local family, and daycare in our area is $300-$400 a week)? We'd need to wait over the 6 month lookback period for sure.

Confused Help!