Brand New here....Here's my question!

[hedgey30]

Hello,
I am currently in a Chapter 13, and have been paying for 1-1/2 years so far. My dilemma is that I am currently living in a house that is valued at nowhere near what I owe. (Mortgage is for 75K, and doubt I could sell it for 50K in this market.) I did not include the house in Bankruptcy but also don't want to be stuck with it after the 13 is over. What is the best way to get rid of the house that won"t hurt so bad in the end? is this even possible? I would love to let it go and walk away, but is that going to hurt my credit even more and for longer? Thanks in advance.....

[LadyInTheRed]

Talk to your attorney about modifying your plan to surrender the house. A mortgage for a house that you retain does not get discharged in a Chap 13. The effect of a foreclosure on your credit score should not be your primary concern. The ability for the lender to collect a deficiency is your biggest risk.

[hedgey30]

B

Talk to your attorney about modifying your plan to surrender the house. A mortgage for a house that you retain does not get discharged in a Chap 13. The effect of a foreclosure on your credit score should not be your primary concern. The ability for the lender to collect a deficiency is your biggest risk.

Here's the thing....my attorney got all of her fee's already, and my wife and I are done dealing with her (she showed up late for both of our hearings! And she is a real pain to deal with.) We were thinking of retaining another attorney and being done with her. But we really want to get rid of our house before the 13 is over and getting stuck with it! Please advise...thanks for the prompt reply.

[hedgey30]

Also....we will be finishing up with our payments in around 2 years (a few creditors never filed!) And will we have less options to get rid of the house after the Chapter 13 is over? To us it seems like getting rid of the house during the 13 is the best way to do it....are we correct in this thinking? The neighborhood has taken a turn for the worse and we want to leave as soon as we can, even if renting is our only option for a while!

[catleg]

You are correct in your thinking.
Once the 13 is discharged you'd be liable for the deficiency.
It would require modifying your plan.

[LadyInTheRed]

You need to either figure out a way to work with your current attorney or find a new attorney. I don't know whether you are in the Southern or Northern District of Ohio, but I checked the local rules for both districts and your attorney can't withdrawal from being your attorney without your consent or, if there is good cause for her withdrawal, an order from the court. You don't have to stay with her if you don't want to, but it's possible the fees you already paid would cover an amendment to your plan. If they don't, your attorney may have to petition the court for additional fees. You may be able to include any additional fees in the plan.

[hedgey30]

LadyintheRed,
Thank you for all your help. I am in Northern Ohio. If I go ahead with an amendment to my plan, would I have to pay more per month? I am already tapped out paying almost 1700 a month as it is now. Like I said I had 2 creditors that did not file knocking off what should be almost 2 years off the plan. I am however paying back 100 percent to the other debtors. Thanks again in advance for all your help.

[LadyInTheRed]

Your new payment would be based on your current income and expenses. So, the only way to know what the new payment would be is to go over your budget with an attorney. Just becuase your plan currently pays 100% to unsecured creditors, does not mean the new plan will have to. If you are having problems with your payment, either your plan is not realistic or you need to work on budget management. If your attorney was not willing to work with you to fight for a workable plan, a new attorney may be a good idea. If I were you, I would make a list of current income and expenses and meet with your attorney about your options, but also consult with another attorney or two.

To see your attorney's responsibilities in the Northern District go to http://www.ohnb.uscourts.gov/judges/...017%202005.pdf.

But, those duties aren't all necessarily covered in your fee. Check your fee agreement. Also, go to http://www.ohnb.uscourts.gov/ and click on the a-z index on the left side of the page to find links to information on procedures for Chapter 13 Attorney Fees to see what your attorney can charge without getting court approval.

[hedgey30]

LadyintheRed,
Thanks for some great info.....one more question for you. Last month my wife called our Mortgage co.and stated that we were gonna be late with our payment ( and they responded with, oh don't worry you are protected by your bankrupcy!) What does this mean? What happens if we just stop making our mortgage payment or skip a month here or there? Assuming we are going to make an amendment to get rid of the house anyways is this a good strategy? Also when we filed - just started a new position and after working this position for the past year I have earned a few bonusues that I didn't earn yet at the time of filing. Bonuses being what they are are not guaranteed, but however they will add about 12,000 to my total earnings last year.....will this hurt me even more if it gets reported in the amendment? Sorry to ask so many questions but like I said my attorney isn't the best for answering questions.

[LadyInTheRed]

You are protected from the mortgage company's collection activity (unless they file a motion for relief from automatic stay which they could do if you stopped paying), but making the mortgage payment is part of the plan (even though you pay it directly) and not making it could be cause for dismissal. Check with your attorney before you miss any payments, even if you are going to amend the plan to surrender the house.

I am not sure how the bonus will affect the plan amendment. If the bonus is not guaranteed, hopefully your attorney will argue that it should not be included in your plan payment. But, the trustee could insist on you turning over all future bonuses. All of this will depend on how things work in your district and with your trustee and the approach your attorney takes. Did you let your attorney know when you received the bonus? That's the kind of thing you should always let your attorney know about in case it must be reported to the trustee. But it may not be so important in a 100% plan. Either way, your total payments over the 60 month plan will not be more than required to pay 100% of your debt, plus trustee fees and any attorney fees that might get added to your plan.

[hedgey30]

Lady in the red...you have been extremely helpful in the past and If you don:t mind I have one more for you. I am really leaning towards making an amendment to my plan with an attorney (maybe not mine as she is sooooo negative with everything!) However my concern is ..how does it work when its all said and done?? Does it take time for the bank to kick me out of my existing house? do i stop paying my mortgage and wait til they officially foreclose on house? Can this add more to my payment if the place I am going to rent is about the same monthly payment? Thanks again for your help...

[LadyInTheRed]

Don't stop paying your mortgage without first consulting an attorney. You want to make sure missing the mortgage payments won't result in a dismissal of your Chap 13. Once you do stop paying, you can stay until you are ordered out. How long that takes depends on your state's foreclosure laws and the lender's practices. If your new rent is less than your mortgage payment, all other things being equal, your plan payment would increase. But, when the plan is modified, I'm pretty sure they will look at all of your current income and expenses to determine your new payment, just like when you first filed. So, it may not simply be the difference between the mortgage and rent.

I have no actual experience with modifying a plan or walking away from a home during BK. My understanding of how it works is based on reading this board. The best way to get input from people who have actually done what you are going to do is by starting a new thread called something like: "Has anyone amended their Chap 13 plan to give up their home?" Also, try searching the archives as you may find previous posts on the subject.

ETA: If you start a new thread, you may want to post a link to it in this thread so you don't start getting answers in both places.