My first Post and I have questions.

[IAmNewToThis]

My wife and I owe a total of $384,000. (Secured Loans - First mortgage $240,000, Second mortgage $14,000, Home Line of Credit $82,000 and Car Loan $8,000 and then various Credit Cards is $40,000).
We live in Maryland and I bring home, after taxes, approximately $3,600 per month, and while my wife does not ‘work’ per se, she does have an additional income of about $800 each month through working under the table cleaning homes. Of course we cannot include that in our monthly income and we surely can’t divulge that information to any trustees. So, from what I understand we have to show our lawyer and trustees that we can live on our $3,600, and that includes paying our first mortgage payment of $1,800 each month. Let’s pretend I can do that and there is $100 a month left over, then the trustees may accept a Chapter 13 and allow us to keep our home provided we continue to pay our mortgage, live on a budget and they (the trustees) continue to get the additional money every month for three to five years we are in the ‘program’.

Now that I have shared my entire personal finances for the world to see I am hoping I might get some important questions answered. You may help my wife and I decide how we can best move forward and provide for our family of three little girls between the ages 8 and 12.

1. We have not gotten an appraisal on our home yet, but I expect it will appraise at or slightly below the $240,000 that remains on our First Mortgage. This will allow a lawyer to file to strip the second mortgage and Home Line of Credit. My first question is “how long after the lawyer files to ‘strip’ are we responsible to continue paying that monthly sum?” If it is even as long as two months then I don’t see how we can afford to make those payments and thereby be forced into Chapter 7 and lose the home anyway.

2. We believe our only asset is the separate lot adjacent to the lot our home sits on. Its value is unknown; however I estimate its value to be $50,000. I do not think there are any liens attached to this property and my wife is checking to make certain on Monday. If we do file for Chapter 13 do you think we will be able to take advantage of the newest MD exemption law and keep $21,000 of the money after the trustees take control and have it sold?

3. I expect to get back approximately $5,000 combined in State and Federal taxes in February. Since I have no real money in the bank will I be able to keep any of that money or will all of it simply be expected to go to the trustees?

I have so many more questions I feel the need to ask, but I will begin with just these three. I will check back often as I continue to educate myself through this forum. I thank you up front for the time you have taken to read, understand and respond.

[shark66]

Welcome to the forum!

Your second mortgage (as well as line of credit) can only be stripped once your Ch.13 bankruptcy case is discharged, be it after three or five years.

Given the financial picture you've presented, I wouldn't count on keeping the tax refunds, although that depends on quite a few things.

Are you current on your first mortgage as of right now?

Good luck.

[IAmNewToThis]

Thank you so much for your response Shark, I'm at my wits end and it helps to know there is at least one place to turn for answers. My wife and I met with a lawyer four days ago (an hour long consultation) and are more confused than ever.

I am one month behind on the first mortgage but current on the second and home line of credit. I can get my hands on enough cash to make myself current (pay last months and this months mortgage), but that is it. If I have to keep paying anything more than the first mortgage past the end of December I will never make it. The lawyer I met with on Tuesday explained he could file my Chapter 13 at the end of December (though he did recommend a Chapter 7 because my income mirrors my mortgage plus expenses). Lets say he does that - will I have to continue paying the second and home line of credit?

[shark66]

If a strip can be done (meaning that you can prove that the house is worth less than what you owe on your first) you will no more be paying for the second, or line or the line of credit.

Remember that these are officially gone only after the bankruptcy is discharged.

Lot of good info here on the forum. Pretty much of a newbie myself.

Ask questions whenever in doubt.

Write the list of them for your attorney.

Check whether your state requires him/her to file an AP (Adversary Proceeding) in order to strip your second mortgage and the line of credit, are they willing to handle that for you if it needs to be done and how much everything will cost...

From what I'm gathering, you have quite some time...don't panic.

Good luck.

[ValleYum]

I was surprised when we had a Competitive Market Analysis done by a Realtor. It was the most eye-opening $50 I have ever spent. I thought we were maybe 40k underwater. Turns out it was over 90k underwater.

Are you determined to stay in your home? Have you looked for comparable rental homes in your area to see if you can further save $$?

Welcome and best of luck to you!!

[momofthree]

We were 6-8 months past due on our 2nd mortgage (that is being stripped) when we filed. You can stop paying those mortgages now. You're just throwing money away on them....Keep current on your first though.

[forgotten]

and while my wife does not ‘work’ per se, she does have an additional income of about $800 each month through working under the table cleaning homes. Of course we cannot include that in our monthly income and we surely can’t divulge that information to any trustees.

I highly suggest you rethink this. By doing that you are commiting federal bankruptcy fraud, which will ensure you do not get a dischrage and can result in subtantial prison time and large fines.
I suggest you add that in as income and put it on your taxes this year. IMO, its not worth the risk.

[catleg]

Ideally what you're looking to do is get into a 36 month plan with a token $100 a month payment.
you would need to put down something feasible as a plan that allows you to pay your house (1st)
and car and living expense within a budget and pays the court $100 a month for your atty and trustee.
You do not actually have to be current on the 1st but you'd have to make up arrears in the plan.
Why so much tax overwitheld? I would say take your time and plan all this out. Any lawsuits yet?

[Pandora]

I agree with forgotten - you're going to have issues with not disclosing your wife's income. Thats always a bad idea to get paid under the table, eventually someone will find out in the end.

As to your situation - you met with an attorney for a reason - and that attorney recommended Ch. 7 based on your income to debt ratio, yet you're ignoring that advice and trying to do a Ch. 13 for some reason... going to assume its because you want to try to strip the HOL and 2nd mortgage. In the end the trustee has to see that your Ch. 13 plan is feasible and unfortunately, it wont be - you're broke before you start, even if you divulge your wife's income. Funding a 13 requires budgeting and living on what you bring home as there are no credit cards or lines of credit to fall back on - you have to live within your means and make it work. You need to ensure you have everything accounted for throughout the year - all bills and expenses - set aside every month to be paid when due. With a family of 5 your IRS allowances are going to be pretty high - probably more than you realize. If you try to do a 13 plan with low allowances - thats also a red flag to the trustee. Somewhere along the process you will probably be questioned as to how you've been able to pay your bills - so again, your wife's income will come into play. We bring home close to what you/your wife do and we're a family of 3 - claiming BELOW the IRS Standards for our 13 to work - we would love to have more money and be up to even what the standards are for our family size but unfortunately we cant because we must make it work for our 13. It's not easy...

I think you should seriously sit down and go over everything in earnest - meet with a few more attorneys as well and decide what to do after those meetings. You are setting yourself up for a few things here that will more than likely result in you filing a 7 down the road, whether it be through the trustee not approving your plan or you begin your 13 plan and find out you cant make it work - which will result in you converting to a 7 and more money to do so.

[IAmNewToThis]

Wow! I'm just now able to sit down at our cpu and am very impressed with the replies. Thank you all very much. We meet with our lawyer again in three days (he has agreed to a second free consultation) and you have provided us with plenty of food for thought - I couldn't be more grateful. As soon as time allows today I will share these points you raise with my wife. I am certain we'll have plenty of questions, and I'll post them here and hope for more answers.

From your many posts it seems we may want to rethink trying to save the house through Chapter 13 and go ahead with a Chapter 7. It is a really difficult decision. My wife is so concerned how it may affect our children. She is so worried about how they may be treated by other school children when the inevitable foreclosure sign goes up. How we may have to part with their dog and cat, especially if we have to move to a home or apartment which is not conducive to animals. And a million other concerns that only a parent who goes through Bankruptcy could understand entirely.

We also should consider coming clean with respect to my wife’s under the table income, it’s not too late since she only began doing this in calendar year 2010.

Why do I get back so much income tax you ask? I always treated that as a kind of savings account. Yes, I know it’s stupid, but it always seemed the government was better at saving our money than we were. I just changed my deductions last week to better reflect a break even amount and help us get an income more equal to our expenses.

What do you think will happen to the plot of land I own and described above? It is our only asset and if it means we can keep a portion of the sale of that property by the trustees through a Maryland exemption law using one chapter over the other than it becomes more obvious which way we should go.

Chapter 13 and struggle for 3-5 years and ‘hope’ we get a discharge or Chapter 7 where we get a clean slate relatively fast and walk away with a small enough ‘nest egg’ (through possible exemptions and staying in the house as long as we can rent free) to help us rent something large enough for a family of five in a good school district... and begin again. I guess that is the real question we have to answer, and soon. The hounds are at the door and the phone has begun to ring constantly - we are too afraid to pick it up. And it has only been one week!

[Okieblue]

No advice on your main issues, but get caller ID and block those numbers that keep calling. Stress ate me up from those calls. Good luck!

[IAmNewToThis]

Thanks Okieblue. Already have caller ID. I understand the stress already, though phone calls only began a week ago. One of the non secured creditors I am a month behind called my office on Friday (gulp). I can't imagine how anyone can deal with that over a long period of time. Right now, since I am trying to bide some time with these creditors while we decide which way to go I have decided to have my wife call them all tomorrow and explain I have been laid off three separate times since August and am back to work full time as of a week ago - back for good. I can begin starting to catch-up at the end of the month. I hope that will stop them from calling my office where I might get in trouble. I hope it works!

[janiemcman]

I agree with the posts thus far. Disclose all earnings and file Chapter 7. Also it is a good idea to consult other attorneys. We did not do this and here's what's happened to us. If you have a car loan, once you file your bankruptcy papers, auto loan company will stop taking payments. Our car got reposessed even though we were keeping it. Be sure you stay on top of that. Also, once we filed bankruptcy our mortgage company contacted us to be part of the Making Homes Affordable program and pre-qualified us for a loan modification. I was already checking into that. Check out the HUD site. They have free advisors in your area to help you with that. Each state has different exemptions including separate home exemptions. Good luck.

[Pandora]

.... I can begin starting to catch-up at the end of the month. I hope that will stop them from calling my office where I might get in trouble. I hope it works!

If you are looking at filing BK - then dont pay the creditors as well as do not use the cards for anything either - you're just throwing good money after bad. Telling a creditor that you are back to work and will play "catch-up at the end of the month" just opens the door for them to get you to agree to pay something today.... and chances are, you will cave and give them the money You dont need to do that - they'll tell you they can do whatever they want, garnish your wages, call your place of employment, family members, neighbors, etc etc etc - and they're right on some of the things they say unfortunately, but also they employ scare tactics as well as saying things that violate FDCPA. Verse yourself and your wife on your rights under FDCPA.

You can tell each creditor that calls you not to call your place of employment - and follow up with a letter stating the same (write down all pertinent information - name of collector, company calling from and for, date, time, etc) and include all of that in the letter. Bottom line is its their job to get you to pay the money you owe - and they do it any way they can, legal or illegal, doesnt matter to them as long as they get the money... ANY money - towards the debt. There are many methods of dealing with collection calls - its up to you to decide which method works best for you, that will not obligate you into agreeing to a monthly payment nor have you state you refuse to pay the debt. Never state you refuse to pay it at any time, that just sets it up for the creditor to move faster and get a possible judgment in their favor.

Search through the forum and read up - you'll learn alot

[IAmNewToThis]

Thanks again Pandora, you and all the others who take time to read and reply are a blessing to my sanity. Thanks for the advice. I can't wait for my wife to get home so I can explain all I have found out and once we get the kids to bed tonight we can sit down together and read all your posts together.

In case I do decide on Chapter 7 does anyone know anything about what our lawyer mentioned last Tuesday, he stated "there is some new exemption law in Maryland (as of the first of November) that might allow us to keep $21,000 from the sale of our property once the trustees take it and send it to auction". ???