Can you file Chapter 7 and still pay mortgage and keep house?

[HAP]

In a nutshell, is that ever possible?

Thanks in advance!

[325Falcon]

Yes! if you can aford it.

[kiddles]

Yes. If you're behind on the mortgage, it gets pretty tricky, but if you're current - no problem.

[HAP]

Thank you. We can afford it and we are not behind. Does it differ from state to state or is it pretty much an across the board federal law?

One more question, we have a home equity loan attached to it (that we are not behind on and could afford to pay also), does this change the above answers?

Thank you so much again!

[yoyoma51]

HAP-

What no one mentioned is it also may depend how much equity you have in your home. If you have too much, they may make you sell it to pay creditors. It depends on the exemptions allowed in your state and if you can use federal exemptions.

Where we live, our exemptions allow us up to $40K in equity. If we didn't have that equity, we could apply the exemption to other items (up to $20K) per the 'wildcard' exemption.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[HAP]

Well, we owe $163,000 on our home. According to tax records, that is what our home is worth. We did a 125% HE loan and that balance is $49,000. We refinished our garage ourself and made it into a movie room/game room (one vent for heating/air) and closed off garage door with wall. I doubt it would make the equity in our house go up that much. In a last ditch effort the other day in speaking with Wells Fargo about refinancing our 2nd mortgage to a better rate from the company that did our HE loan, (Wells Fargo is our 1st lender and Irwin Mortgage is our 2nd) the guy on the phone put me on hold to do an on-line appraisal (whatever that is) and said that my house appraised (over the phone meaning no one came and looked or did any kind of analysis) for about $190,000. So one scenario is we owe combined both mortgages of $212,000 but with value of $163,000. The other is we owe $212,000 with value of $190,000. Not sure if that confuses anyone or not.

Thanks again.

[chpxiii]

Either way, looks like you're upside down on your house.

[HAP]

Yes that's definitely true. However, if we get rid of all our cc debt, unsecured loans, and big a$$ truck payment, and travel trailer payment we'd have no problem paying the 1st and 2nd mortgage.

[chpxiii]

Yes that's definitely true. However, if we get rid of all our cc debt, unsecured loans, and big a$$ truck payment, and travel trailer payment we'd have no problem paying the 1st and 2nd mortgage.

*nods*

Keeping the house would be a good thing, IMO, if you can afford it sans all other debt. I wish you luck.

[keepmine]

Looks like the negative equity is in the $30K or better range.
There is just noway that's a sound financial decision. BK is all about a fresh start-not about affording a depreciating asset. I'd ditch the house and start all over.

[yoyoma51]

keepmine-

I was thinking the same thing. How can you recover from a -$30k equity when home values continue to drop?

[HAP]

But would it be worth the hassle of moving (possibly to new school district if we couldn't find anything in the one we are already) and most likely renting some place would run $1,000 - $1,200 while we're already paying $1,240. To rent we would have to come up with a regular deposit and a pet deposit, more phone and utility deposits, moving van/u-haul costs, etc., etc., wouldn't get any tax break for renting. I'm just not seeing how saving maybe $200/month is worth all that. If we can get rid of all the other debt and can start paying down faster the HE debt, I guess I'm just weighing the options. I'm not trying to argue with anyone or make excuses, just trying to figure out what's best for our family.

Thanks again.

[yoyoma51]

My thoughts are these:

You'll probably never get ahead on your house (you will probably always owe more than it is worth and won't 'catch up' as most of your home payments are probably going to interest).

If you want to sell your home later on, you won't be able to as by that time you could owe $50k or $75k more than it is worth (at the rate homes continue to depreciate (and it doesn't look like there is going to be an end to that anytime soon).

You've already 'lost' $30k on the house. It will be a lot harder when you're $50k or $75k upside down. Then you will have continued to make the payments for nothing anyway.

Take this opportunity to walk away from the loss before it gets bigger AND you have to pay for it.

Just my humble opinion. I wish you good luck whatever you decide to do.

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless. Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[keepmine]

But would it be worth the hassle of moving (possibly to new school district if we couldn't find anything in the one we are already) and most likely renting some place would run $1,000 - $1,200 while we're already paying $1,240. To rent we would have to come up with a regular deposit and a pet deposit, more phone and utility deposits, moving van/u-haul costs, etc., etc., wouldn't get any tax break for renting. I'm just not seeing how saving maybe $200/month is worth all that. If we can get rid of all the other debt and can start paying down faster the HE debt, I guess I'm just weighing the options. I'm not trying to argue with anyone or make excuses, just trying to figure out what's best for our family.

Thanks again.

I really think you're not seeing the forest for the trees. You are fixated on a monthly payment. You don't seem to understand that you are trying to hang onto to something that's underwater by $30K or more.
You'll discover that filing bk is the easy part. What comes next is tougher. Not making the poor financial decisions that got you here. Do really believe that hanging onto something that is worth far less than is owed is a smart thing to do? It would be a shame to exit bk with a negative net worth.

[yoyoma51]

Well said, keepmine.

This person may have not had there "ah hah" moment yet.

Hopefully, they get there.