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    Met with an attorney today

    I met with a bankruptcy attorney today. He was strongly recommended, and has a LOT of experience with debtors and rental properties. He has argued (and won) cases through a couple of levels of appeals, and several of his cases are used to interpret the bankruptcy law.

    He is also a very interesting guy in person. Our 1 hr consultation went well past 90 minutes and we talked in great detail. Good personal connection. He is not a clock watcher, and he doesn't mind discussing alternate actions.

    The meeting was very interesting... besides my day job, I own several rentals that cash flow positive, but are upside down in equity. Because of other issues in my life, the rental money has been drained away to pay for other costs (medical, jacked-up interest costs, etc.)

    Because of the laws in my state, my wife and I have (mostly) separate finances, in case a tenant ever tries to sue... a C-13 was always a fallback plan in case of a bad lawsuit, and I wanted to keep my wife firewalled apart. In this case, it looks like the strategy may pay off well.

    Rentals: I plan to reaffirm the mortgages, and continue to pay the mortgages outside the plan. Attorney thinks this will not be a problem, and with the drop in R/E prices, there is no equity to tempt a trustee into forcing a sale. Attorney thinks the rental company will be left alone. It is profitable, but needs time to rebuild the repair/vacancy reserves.

    Wife: She will not be filing, and her income will be deducted in the 22c. But since her car is in both names, it must be paid for from my C-13 payment plan using my money. This will give her an "interesting" pay raise.

    There is the issue of how the car being paid will look on her credit report, but it is too new to cram down the balance, so it is being paid in full.

    Me: I had been running the 22c and it looks like the payment it proposes is actually less than I can afford to pay. I thought I had done something wrong. The attorney looked at it, grinned and said "You did it right.. and this is the first time I've seen this happen!" So if the 22c is followed, I will actually have breathing space. We plan to start with the 22c figures for the trustee. If the trustee also thinks it is too low, we have room to negotiate.

    A significant question for the trustee is whether to demand the student loans be put into forebearance during the 60 months, paid normally or interest only. It will make a big difference to the amount paid the unsecured creditors, but my attorney doesn't seem to be worried about a credit card company protest. It's another chip to negotiate with.

    Bottom line: Yes, it will be 60 months of high payments. But if the rental company is left alone, I can build a savings/repair cushion within it. And it will be 60 months of being able to sleep at night, without worry.

    And in my case, another good issue is starting the planning now. I am not late on any payments yet, but it is about to happen, it will not be avoided, and I can plan the steps to reorganize and rebuild without rush and panic.

    I wanted to say "thanks" to everybody here who answered both my questions and others. Reading this forum has been fantastic!

    #2
    Originally posted by Slingerland View Post
    Rentals: I plan to reaffirm the mortgages, and continue to pay the mortgages outside the plan. Attorney thinks this will not be a problem, and with the drop in R/E prices, there is no equity to tempt a trustee into forcing a sale. Attorney thinks the rental company will be left alone. It is profitable, but needs time to rebuild the repair/vacancy reserves.
    You're broke, you have no repair/vacancy reserves, you have upside down rental property, and you're going to reaffirm the mortgages?

    You've got a couple of big ones. That's all I've got to say....
    All information contained in this post is for informational and amusement purposes only.
    Bankruptcy is a process, not an event.......

    Comment


      #3
      The rentals cash flow very well and are not my main source of income. Their resale value is only down 20% or so... not like Las Vegas or Florida where values are down 75%. So yeah, they're upside down if I want to sell, but they generate about 35% free cash after normal mortgage and insurance expenses.

      They were bought to be a retirement strategy, not to provide money to live on today. And left alone, they're quite profitable. But I didn't leave them alone

      My "brokeness" comes from other factors: wife's medical bills (colon cancer), 20% paycut at day job, credit card interest rates hiked from 6.9% (not a teaser rate) to 29.95%, son in college, another with ADHD and medication bills, etc.

      To cover these debts, I've been spending my entire take-home from the day job, plus raiding the profits from the rentals. Think of it as borrowing from a 401(k) to pay a credit card.

      So I take the sword for myself, and my wife and the rental company can survive.

      Comment


        #4
        I hope your wife is well on the road to a full recovery, and I hope for a financial recovery for both of you. I am glad you found an attorney that you are comfortable with.

        My very best wishes to you both!
        "To go bravely forward is to invite a miracle."

        "Worry is the darkroom where negatives are formed."

        Comment


          #5
          Best wishes on this road!!!!!

          Comment


            #6
            In most cases/circuits, you don't have to reaffirm real property to keep it.

            You elect "reaffirm" on your Statement of Intentions but you don't actually sign a reaffirmation agreement. That way you get the best of both worlds: you keep your rentals, but if your circumstances change post-filing you are free to walk away from the properties (or perhaps one or two of them) without having to worry about IRS debt forgiveness, deficiencies, etc.

            Keep the rentals but shed the risk.

            And so long as you don't default, it's business as usual.
            There are two secrets for success in life:
            1.) Never tell everything you know.

            Comment


              #7
              To my understanding, there aren't any reaffirmations in a Chapter 13.
              Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
              I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

              Comment


                #8
                A 13 will keep the mortgage in place on the rentals (no reaffirmation is necessary, just keep paying).
                In fact it might benefit you to let them go into arrears to provide some cash for repairs/upkeep.
                As long as your equity is less than the sum of your plan payments, the trustee should not object.

                A 7 will strip your personal liability for the mortgages but the lien against the property survives.
                You have to be current with no arrears to keep em.
                Your equity must fall within bankruptcy exemptions.
                filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

                Comment


                  #9
                  I was being loose with my terms... you're right a reaffirmation is not required in a C13. In my case, due to income I don't qualify for a 7. At 35% free cash, I should have the ability to weather a major repair (roof, HVAC, etc) in 3 months, then a strong company again within 24 months. Longer if I have a vacancy or several smaller repairs, but I'll be in better shape than right now!

                  But the most important part to me is that I see a light ahead and it's not a train.

                  I know it seems like I'm gloating, but for the past few years I've tried to keep my spirits up during my wife's surgery, chemo, recovery. Whenever a bill came up that insurance didn't cover, I quietly paid it. When she wanted to eat at a fancy restaurant, I quietly paid for it so she wouldn't feel like she was a burden.

                  When she lost pay due to being sick (she exhausted her sick pay), I picked up the difference. When my employer cut my pay 20% due to the economy, I started dipping into the rental profits so my wife wouldn't worry.

                  Now she is healthy again. The cancer appears to be gone, her blood enzymes are clear, her energy is returning. I see a future again. And when I look at the bankruptcy payment we're setting up, it's less than all the combined minimums I'm paying now. Not a lot less , but enough to let me save money again, build up the rentals again, build a future again.

                  Yeah, I'm broke. But I have my health, my day job (pay is being restored), my rentals, my family. I'll rebuild, dangit!

                  Comment


                    #10
                    Slingerland, I appreciate and understand very well about quietly paying for this and that...all I can say is so glad your wife is better, and my best wishes to both of you!!!!!!!!!!!!!!!!!!

                    Comment


                      #11
                      Thought you cant make any extra money in a 13 or they take it?

                      Comment


                        #12
                        The rentals have to be able to provide for repairs needed. Since there is no repair reserve (I've had very high repair costs due to the storms this year), a leaky roof or a plugged sewer line will force the tenant to move out... causing me to turn the property over to the bank... causing more headache. So the rental company will be left alone to replenish repair reserves.

                        As long as I don't use the money for personal items, it will be fine. I have to file updates with the trustee of course... if my reserves get too high he'll want a distribution. But my attorney has rentals and knows how to write up the paperwork.

                        Comment

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