Assets more than unsecured debt- what do you pay?

[underwater2]

Ok quick summary.
1st is 320K, 2nd 175K. Appraisal is 316K. 4K in CC debt. No other debt. Live in FL. We were planning on stripping with a Ch13.

We met with 3 atty's that were ok with ch13 althought a couple said the 2nd might contest the home value being so close. 4th atty said go ch 7 and ditch the house.

2nd is going for breach of contract judgment (Jan court date). 6K in cash. We also have a condo in europe worth 40K. I took the online nolo means test and I qualify for ch 7, despite being 5K over the state median income.

We met with a 5th atty tonight and he said that we do NOT qualify for Ch 7 since we were above the median. Cut and dry. Next he said something interesting. He said we could file Ch 13 and keep the 2nd in a secured position- and forget about the lien strip. This way we would only have to pay 4K (for the CC + trustee costs) and since the amt is so small he could probably get it dismissed in a few months rather than 5 years.

This suprised us since we have 50K in non-exempt assets, condo + 10K in cash, ect. He said we would only be responsible for the unsecured debt. The 1st would eventually foreclose and the 2nd judgement suit would be stopped and no one could come after us later.

Can anyone confirm if this would work? We are really confused right now but this plan sounds really good to us. Thanks for your help. Hopefully this helps someone else in our spot.

[newbie2]

This is all very confusing. You talk about a lien strip (the first attorneys you consulted) yet at the end of your post you talk about the 1st foreclosing. First, do you plan on keeping your home? If not, then go for a Chapter 7 since you don't have any unsecured debt (or very little of it) and surrender the house (and the 1st & 2nd mortgages) and be done with it all. Why pay the little unsecured debt you have in to a Chapter 13 plan when you can cover that amount upfront in a Chapter 7..

[underwater2]

We do not want to do Ch 7 because we would have to give up all our non-exmpt assets. Basically he said we could do a 13, protect our assets and just pay the 4K in CC. I just mentioned foreclosure in that if we do not keep paying the mortgage that is what will eventually happen.

After my post I read that all disposable income needs to be used to pay "unsecured" creditors. If we decide to give up the house how much will we have to pay in a Ch 13?

Can anyone shed light on this... Thanks

[Pandora]

If you do a 13 and keep your assets and cannot exempt them - you will have to pay the value of them back into your Ch. 13 plan - else you will lose them. Any assets you cannot exempt must be either liquidated as the same basis for Ch. 7 - or you pay the value back in your plan for the 60 month timeframe. So if you have 50K in assets that you cannot exempt, your plan automatically starts at 50K - then add in whatever else you have based on your DMI. Miminum payment on 50K @ 60 months = $833 plus trustee and legal fees if rolled in.

Although I am wondering how you can claim the house in Europe given its overseas... ??

ETA: as far as your plan payment if you give up the house - assuming you will rent a place - then the difference between your mortgage and rent payment will be calculated as part of your DMI, after everything is taken out for your budget.

[momofthree]

I'm not an attorney, nor do I have experience with this, but here would be my concern:

You might find that in the ch.13 the 2nd mortgage could become unsecured debt--as can any deficiency balance from your first. If you want to keep your non-exempt assets, they'd have to receive at least as much as they'd receive if you went thru a ch.7 liquidation. So, if your assets are $50k and you can exempt $5k of them (just to use round #s, don't know your actual exemptions), then you would have to pay at least $45k towards your unsecured creditors (mainly to your 2nd mortgage from the way it sounds...).

From a quick google search, it does appear that FL is a recourse state, meaning they can pursue you for a deficiency balance, so that would most likely apply.

Now, again, I'm not sure exactly how this works. Maybe if you surrender the home, the balance just goes away like it does in a ch.7, but I don't think it does. Double check with a couple different attorneys.

[Pandora]

... This way we would only have to pay 4K (for the CC + trustee costs) and since the amt is so small he could probably get it dismissed in a few months rather than 5 years.

You're over the median - this means an automatic 60 month plan. Your attorney is talking about getting your 13 dismissed - that means you will voluntarily remove yourself from your 13 plan - it doesnt mean you get a discharge early.

[underwater2]

Thanks for your replies. Paying back 5 with 50K in assets sounds a little odd. None of the other attys mentioned that before.
Pandora- can you please explain the part about how I could claim a house in Europe? Do you mean that does not have to be listed or it cannot be exempted. Also does anyone know how overseas properties are valued? We have a rough idea. thanks

[Pandora]

Thanks for your replies. Paying back 5 with 50K in assets sounds a little odd. None of the other attys mentioned that before.
Pandora- can you please explain the part about how I could claim a house in Europe? Do you mean that does not have to be listed or it cannot be exempted. Also does anyone know how overseas properties are valued? We have a rough idea. thanks

I have no idea how it works with overseas assets... I'd imagine it works just like everything else - you have to claim it as an asset however the trustee may just require you pay it back in your plan vs. turning it over to him/her to sell. Thats something you'll have to ask the lawyer.