Need consensus with how to make chapter13 work... trying to save our home iin CA...

[johnjan2009]

I've just found this great forum and I thank God for this... Just like everyone else, I ran into problems like paycuts, spouse job loss, etc which made us with the following financial mess in summary. Company I worked with filed chp11 last year and just emerged:-(

I have the following secured debts:
home(1st loan) - $700k (mo.pay+escrow=$2600) -current since it was modified after fighting for almost 2 yrs.
heloc/2nd loan - $140k (mo.pay=$600) behind by 22mos
cred cards - $60k (mo. pay=$1000) behind by 12mos
car loan - $14k (mo. pay=$730, current and will be paid off in 14 mos)

Home valued @ $450k on zillow.
Family gross income is $7800 per mo.
asset another car worth $5k. Finance car which loan balance is the same as fair market value but we would love to keep it...No significant savings..

Now, I went online for BK means test and my DMI(disposable mo. income) is negative($-450). Based on these info, can I file chapter 13+ 2nd lien strip? If so, what will be my expected monthly payment on the chp13 plan and how it will be calculated since online showed negative/nill? Will chpt7 be an option to keep home, 2 cars for family and stripped 2nd loan and discharge all remaining credit card debts?


I really appreciate anyone's thoughts and advise from this forum... I know a lot of you have experienced this already so please advise me on my situation on what you think is best...

thanks in advance and I apologize if message is a little lengthy...
Help!!

-J

[LadyInTheRed]

Since your home is worth less than the balance on the first mortgage, you can strip the 2nd in a 13, but not in a 7. If you strip the 2nd, that $600 payment will not be included in calculating your DMI. It's hard to tell you what your plan payment will be without reviewing all of your living expenses. You should consult with a few experienced BK attorneys to get a better idea. But, I'm sure others will provide more details to help you calculate what your payment might be.

One thing you should consider is whether it is worth it to keep a home that is so far underwater even after stripping the second. I'm in the same boat and may be even further underwater based on percentage, but my mortgage is less than half of yours. Many would tell me I should walk and you will probably hear the same thing. But, since I can't rent anything comparable for less and hope to retire right where I am, I decided to stay put.

ETA: Assuming you don't have any other significant assets, you shouldn't have a problem keeping the $5k car. California has a pretty generous wild card exemption that will more than cover it. For more info on CA exemptions, see my blog entry.

[LadyInTheRed]

In your other post you said:

My understanding from my atty is my plan will only cover my car, trustee admin and atty fees and nothing will go to unsecured like credit cards

If that is the case, your plan payment will probably be [($14k + interest)/60] + attorney fees paid in plan/60 + trustee fees (add 10%, but I think it will be less). Very similar to my plan, except I owe more on the car loan. The balance on my car loan was about $17k and I'm paying $4800 attorney fees in the plan. My payment is $500/mo, and includes "pro tanto" to unsecured creditors, which means the unsecured creditors will get a tiny amount that will be left.