House $309K under water... file / foreclosure/both?

[johninred]

My next considerations.
Find another lawyer and talk more about Chapter 13 vs 7
Continue to work with Wells Fargo on a reduced principle but that has been not working out
Consider short sale again (tried without success previously)
Foreclosure without bankruptcy (they can take a judgement for at least the secondary.... maybe even the primary...
others????? NOTE: I HAVE PMI....

I'm really looking for advice on other considerations or resources I should consider. Thankfully our jobs are safe and we are successful in work so that part is stable.

We have an attachment to the area, not the house and there are a ton of rental houses in the area that would meet our needs.

I greatly appreciate anyone's thoughts and assistance.

[shark66]

Without knowing more details, I'd say this much:

a) Forget short sales, they are waste of time and do absolutely nothing for you.

b) Try to get yourself in Ch. 7 and surrender the house.

Good luck.

[johninred]

with $9500 monthly net how do i get into chapter 7?

Without knowing more details, I'd say this much:

a) Forget short sales, they are waste of time and do absolutely nothing for you.

b) Try to get yourself in Ch. 7 and surrender the house.

Good luck.

So how do I get into Chapter 7 with my income?

[shark66]

So how do I get into Chapter 7 with my income?

You've not stated anything about your income in the opening post of this thread...

With that type of income, you'll likely end up in a Ch. 13...but you could still give up the house...

I still stand behind what I said about short sales...

Good luck.

[johninred]

Wow sorry, I edited my first post and must have removed a number of details by accident.:

Me - 8100 gross 6500 net
Wife - 4500 gross 3000 net

401k ~ 11% for each

Total net 9500

I have the following outgoing big expenses monthly:

Business Meals = 600
mortgage = 3250
equity line = 500
Car 1 = 250
Car 2 = 450
Fuel = 750
Child care = 2000
Food = 700
Insurance = 200 (Cars)
Utility = 250 (Ele+Gas)
Cable = 150 (Internet + Cable)
Cell = 300 (I cover my parents and my mother in law)

$9400 Total

Here are the outstanding balances of major items

mortgage $498k
equity line $107k
Car 1 $6k (worth $6K)
Car 2 $4k (worth $8k)

The cell and putting my job at risk by not paying for business meals is about the only thing we could cut back on.

[locolady]

Wow sorry, I edited my first post and must have removed a number of details by accident.:

Me - 8100 gross 6500 net
Wife - 4500 gross 3000 net

401k ~ 11% for each

Total net 9500

I have the following outgoing big expenses monthly:

Business Meals = 600
mortgage = 3250
equity line = 500
Car 1 = 250
Car 2 = 450
Fuel = 750
Child care = 2000
Food = 700
Insurance = 200 (Cars)
Utility = 250 (Ele+Gas)
Cable = 150 (Internet + Cable)
Cell = 300 (I cover my parents and my mother in law)

$9400 Total

Here are the outstanding balances of major items

mortgage $498k
equity line $107k
Car 1 $6k (worth $6K)
Car 2 $4k (worth $8k)

The cell and putting my job at risk by not paying for business meals is about the only thing we could cut back on.

Wow sorry, I edited my first post and must have removed a number of details by accident.:

Me - 8100 gross 6500 net
Wife - 4500 gross 3000 net

401k ~ 11% for each

Total net 9500

I have the following outgoing big expenses monthly:

Business Meals = 600
mortgage = 3250
equity line = 500
Car 1 = 250
Car 2 = 450
Fuel = 750
Child care = 2000
Food = 700
Insurance = 200 (Cars)
Utility = 250 (Ele+Gas)
Cable = 150 (Internet + Cable)
Cell = 300 (I cover my parents and my mother in law)

$9400 Total

Here are the outstanding balances of major items

mortgage $498k
equity line $107k
Car 1 $6k (worth $6K)
Car 2 $4k (worth $8k)

The cell and putting my job at risk by not paying for business meals is about the only thing we could cut back on.

What I think you must do is consulted with a lawyer and see how much you have to pay in to the BK 13 plan. If the numbers work in your favor make a business decision to file or not. But you will only lose that unsecured second and since you didn't list any credit card debit. You seem to only want a principal reduction and that's not happening anymore. What I'd do is stop paying the second if money is tight, it will screw your FICO score but you saved $500 a month. They will not foreclose that I can guarantee no lender will pay off a underwater first mortgage. I stop paying my second a year before we file and never heard a word..

I hope you do consider letting the house go, at 309k underwater that house value will not come back for a long time. You are really renting from the bank @3700 month, I bet you can beat that in the same area for a lot less why not rent. I see Minnesota is non recourse on first but not equity second in some circumstances, so this is another consideration if you file.

[spidge]

There is quite a bit to talk about here, budget wise for a 13. I suggest you work through the online means test.


Although there is a car allowance ($475 each I think) the equity in them will be an issue.
Your Cell phone bill will likely be budgeted at $120.
Cable and Internet will likely be pushed down to $120.
Your food figure is close. Family of four is $750.
Look at your insurance to see if you can adjust for your monthly budget.
Are you self employed causing you to pay for your own business lunches?

Mortgage.

There are a couple things that run through your mind on this topic and many disagree with my take, but I will share my thoughts anyway.
What are the rents like compared to your current home? Can you handle adjusting your lifestyle to allow renting a home that is not nearly as expensive yet still has the room you need. Some people seem to try and sustain a certain lifestyle and status through the home and lock themselves up financially. If renting comes out to a similar monthly expense as paying your first, taxes and insurance on the house, and all that goes with ownership then why would you rent? The market will turn around eventually (a long time away) and you may be renting from the bank, so to speak, but you would be able to continue life in your current home. Its still a tough decision. Also consider your tax benefit from interest off your income. This will make a huge difference in your adjustable gross income when you file your taxes.
Consider stop paying the second if the mortgage is held by a different bank than the first. I did not pay mine for two full years before we filed our 13. You could try to settle with them after non payment if you do not file.

I am no expert and am only sharing my thoughts and experiences so please take them as food for thought and to generate more questions for an attorney.

At your income you would likely be a Ch 13 case with a substantial payment, so please take some time to go get opinions from at least three attorneys and have them work it up. Read, read, read more here and anything that may apply to your circumstances so you have a list of questions going in.

Tough spot to be in and at your income level I might fear the trustee digging very deep for any kind of assets.

[johninred]

Are you self employed causing you to pay for your own business lunches?

Yes, I'm in sales and part if this is taking my clients out for lunch.

Mortgage Issues

The first and second are with the same bank. In the area, the houses are $250-300 for something reasonable. and rents now go for $2000-2200 or so. If I can work with my family, they may even purchase a house with a 15 year mortgage in the area we like for $1536/month and we would pay them $2000 in rent for their trouble then have them sell it to us when our credit is repaired... by then we should have the mortgage to 60% of the home value.

At your income you would likely be a Ch 13 case with a substantial payment, so please take some time to go get opinions from at least three attorneys and have them work it up. Read, read, read more here and anything that may apply to your circumstances so you have a list of questions going in.

Tough spot to be in and at your income level I might fear the trustee digging very deep for any kind of assets.

What can be considered assets? The cars? other than that, we have nothing other than laptops, furniture etc. Even jewelry is cheap costume stuff.
The funny thing is that other than the home we were always very limited in our spending (well actually the home cost sort of forced that). I had a business that used to add $70K to our yearly income which is now gone and that is what lead to the issue.

Thanks again for your assistance. I absolutely love this forum and how nice everyone is.

[johninred]

So it sounds like the summary should be:

1. Stop paying
2. Let happen what is going to happen
3. If (when) they come back to get me consider settling or file Chapter 13 then.

[walkthaplank]

Johninred, talk to several lawyers in your area before you do anything. You are in a fairly precarious situation here. You might want to see if you can get a lawyer who is willing to work to get you through a CH 7 where you keep (not reaffirm) your home and then after your case is closed, you can let the bank foreclose and move on with your life. Where you might run into trouble if you stop paying your mortgage NOW is that you are committing to a course of action without really knowing it and it might be a very bad course of action. When it comes to determining DMI, the trustees in your area might hold very strictly to IRS guidelines for housing/rental expenses which will be substantially lower than the reality of expenses in your area. A mortgage is generally accepted as a housing expense regardless of the amount. Letting your house foreclose prior to filing ends up creating a double hit on your credit reports, yes it should be one of the last things on your mind, but planning is everything when it comes to filing BK. Don't take any hits you don't have to.

So, plan of action is 1)Talk to SEVERAL attorneys before doing ANYTHING.

As to your expenses, if you can justify them for your employment and your attorney is willing to fight for it you should be fine. Yes they are fairly high, but if you need them at those levels to earn your income they likely can squeak by. Business losses being a part of your case might help you into a CH7. Is your business losses connected to at least 50% of your unsecured debt? If so the means test will be moot. If the loss is just loss of income, that might be another story.

See what exemptions are in your area, how much of that property (cars/furniture etc) can you exempt? You have lots of homework to just find out the questions you should be asking the lawyers you will be consulting. If you don't NEED to be in a CH13 for some reason and can avoid it, do so. Best of luck!

[johninred]

Johninred, talk to several lawyers in your area before you do anything. You are in a fairly precarious situation here. You might want to see if you can get a lawyer who is willing to work to get you through a CH 7 where you keep (not reaffirm) your home and then after your case is closed, you can let the bank foreclose and move on with your life.

By keeping the house I'm not sure what I'm gaining so you (and my lawyers) are going to have to help me out. Keeping my primary means having a loan at $498K with a house (I assume the secondary is discharged in the theoretical C7) that will still take several decades to hit anywhere near that again. On the flip side, we have little/no attachment to the house and a suitable home in the is easily rented and hopefully purchasable in the 5-7 year time frame.

So, plan of action is 1)Talk to SEVERAL attorneys before doing ANYTHING.

Will do

As to your expenses, if you can justify them for your employment and your attorney is willing to fight for it you should be fine. Yes they are fairly high, but if you need them at those levels to earn your income they likely can squeak by. Business losses being a part of your case might help you into a CH7. Is your business losses connected to at least 50% of your unsecured debt? If so the means test will be moot. If the loss is just loss of income, that might be another story.

Thanks, the debt is documented on my tax statements but as to where I absorbed the losses...that isn't easy to track. I more than likely paid for business expenses on the CC (that I paid off) and let home items hit the home equity line.

See what exemptions are in your area, how much of that property (cars/furniture etc) can you exempt? You have lots of homework to just find out the questions you should be asking the lawyers you will be consulting. If you don't NEED to be in a CH13 for some reason and can avoid it, do so. Best of luck!

Sounds like I'll be hunting down experiences here as well as on the web to determine what have others been able to clear as Chapter 7 vs 13. It's a fairly small area of a major metro area that has been hit extremely hard so hopefully I can find the documentation I need.

[Pandora]

johnny,

I think you may be missing quite a few things in your budget . you need to account for:

Medical (OTC, RX, copayments, deductibles, dental, etc)
Pets (vet care is expensive if your pet gets sick)
Entertainment (yes its allowed)
Tithing
Clothing (average is about $25 per person)
Vehicle maintenance (oil changes, tire rotations, etc)
Tags, drivers licenses, inspections
Etc Etc Etc

The list goes on and on; if you do a search under Ch. 13 forums you will find many posts about what to include in your expenses.


I think the trustee is possibly going to have issues with your cell phone bill, fuel expenses, and possibly your business related lunches. You're spending nearly as much on those that you are on groceries. You have to remember if you are over median you get only what the IRS standard allows in your area on many things (which may be why you are at $750 for groceries). Also your utilities look very low - are you on a budget payment plan? Do you ever owe at the end of the budget year? Account for those areas that may increase once you file BK (like insurance *home, auto* if you're in a credit profiling state).


ETA: Just saw where you said your 1st & 2nd were with the same lender; that gets a bit tricky in the foreclosure area because chances of the lender foreclosing is much higher than if your 2nd was held by another lender. Something to keep in mind and ask many questions about.

[GWBcasualty]

Crazy times indeed....

Look at the numbers you posted:
Your wife is basically PAYING to work.

$3000 net vs $2000 child care + gas + car payment? + meals and other expenses associated with working.

Please, understand, no judgment at all on your situation... just sayin' that this are crazy times, when we are just all on this hamster wheel and cannot make it happen as every extra dime one makes is taken from you one way or another.

[locolady]

Crazy times indeed....

Look at the numbers you posted:
Your wife is basically PAYING to work.

$3000 net vs $2000 child care + gas + car payment? + meals and other expenses associated with working.

Please, understand, no judgment at all on your situation... just sayin' that this are crazy times, when we are just all on this hamster wheel and cannot make it happen as every extra dime one makes is taken from you one way or another.

What a great point you are making. This is such a statement on our current society with the need to have two wage earner and the extra income being generated ends up primarily to support that job. I wonder if the 2k a month is child care or for private school? By the way under our current tax code they may get back a really nice refund check every year which will affect them in a chapter 13 filing.

[walkthaplank]

By keeping the house I'm not sure what I'm gaining so you (and my lawyers) are going to have to help me out. Keeping my primary means having a loan at $498K with a house (I assume the secondary is discharged in the theoretical C7) that will still take several decades to hit anywhere near that again. On the flip side, we have little/no attachment to the house and a suitable home in the is easily rented and hopefully purchasable in the 5-7 year time frame.

Here is why, you can generally use your full house payment as housing expenses for the means test. If you "surrender" your house, your trustee is most likely going to include the IRS guideline for a rental as your housing expenses. That number will be substantially lower than the reality of what is normal in your area creating Disposable Monthly Income (DMI). In most districts you can opt to keep your house without reaffirming the debt. Once your CH7 is discharged and closed, your personal responsibility to your mortgage is discharged. You can then walk away from your home and let the lender foreclose without any further penalty or hit on your credit. You'll even be able to continue living in the house without paying during the foreclosure process. So with keeping your house, you can keep yourself out of a CH13 and still walk away from your house later. Make sense?