Lot Loan Chapter 13

[chrismic1995]

I am looking for advise on how to handle a Lot Loan (raw property), I have been trying to sell the lot for over 4 years but my 5 year balloon payment is coming due very soon and I can not get it refinance because it has dropped over 100K in value. After filling out the Chapter 7 means test I do not believe that I will qualify. My wife and I have stopped making payments on the lot loan because we can't afford it anymore (just had our second child and daycare expenses are outrages!!)

I believe that the lot loan is secure debt, so I do not believe that chapter 13 will eliminate it. What options do I have since I can not afford it nor can I sell it or refinance it?

Thanks everybody for this great forum!!!!!

[lrprn]

Until an experienced bankruptcy lawyer who is very familiar with both the trustees' and the local bk court's customs and practices completes the Means Test and Schedules using your figures and adding in some expenses you probably haven't even thought of yet, you truly can't tell if you can file Ch 7 or Ch 13, or even if filing bk is the right thing for your situation or not.

The bankruptcy laws can often be more gray than black and white. To make things worse, how the bk law is interpreted depends on the state and court district you live in. There's a lot of variance in how the bk law is administered across the country, so you need a local bk attorney who knows these local interpretations and can use them to your advantage.

If you haven't done so yet, start by making 3-4 free initial appointments with very experienced bankruptcy-specialty lawyers who frequently file both Ch 7s and Ch 13s in your area. Next document all your current financial obligations - secured asset payments, unsecured credit card debts - every single debt you owe. Average each one of your living expenses over the last six months, and include any annual payments (taxes, insurance, HOAs, etc). Get accurate estimates of the current market value of your secured assets. Take all of these figures with you to each one of your appointments to get a sense of which lawyer understands your situation best and who will represent your interests best.

The most dangerous thing you can do right now is to make assumptions about which chapter you can file and when based only on taking a Means Test online yourself. It doesn't cost anything initially to get more accurate information from several experienced bk lawyers about what might be possible in your situation and what options will help you get out of the financial hole best.

Get going and set up those appointments! Let us know what you find out, ok? Good luck!

[helpmeout]

A chapter 13, if that is what several lawyers conclude that you have to file, will discharge the debt associated with the raw property. What it won't do, just like a Chapter 7 won't, is eliminate the lien on the property. The lender would foreclose and take the property. But cannot come after you for any shortfall when it is sold. It's just that in a Chapter 13, secured creditors get paid before unsecured creditors.

[despritfreya]

If you are forced into a Chapter 13, the Plan would provide for the surrender of the property. Once the property is foreclosed the lender would be free to amend its secured claim to that of a general unsecured claim for the deficiency. It would be treated like any other general unsecured claim and discharged upon completion of the Plan and entry of the Discharge.

Des.

[chrismic1995]

Thank you all for the valuable information, I am scheduled to meet with a Bankruptcy attorney that my friend used and was very happy. I just want to make sure that I am prepared for the meeting and present him with all the needed information. I also want to make sure that I understand all my options just incase he is not the attorney for me and leads me down the wrong path.

On a side note, since I am going to file BK becuase of the land and if I have to use chapter 13 my next question is should I or can I walk away from the house. What are your opinoinis based on the info below? I have spoke to 3 different real estate agents and they all believe that the housing prices will continue to slide downward in my area, because of the next round of foreclosures. I purchased my house for 512k and right now my 1st is at 412k my second at 77k but my house is currently valued at 375k, with more room to drop.


Once again thanks to everybody, I do not know what I would do without this forum!!!

[helpmeout]

I would look at the rentals in your area and if it is comparable to what you pay for your first mortgage, then I would consider staying as long as your house doesn't require a lot of repairs in the next 5 years. Since your house is upside down on the first mortgage, you should be able to strip the second in a Chapter 13. What this does is removes the lien and makes the second an unsecured loan which will get paid (or not paid depending on your payback plan) with other unsecured debt (such as credit card debt). FYI, a lien strip cannot be done in a Chapter 7. Just one more thing to discuss with an attorney.