Newbie has question regarding Chapter 7 and home

[soulprincess]

Hello all! I am new to the BK game and have some questions. I have done a fair amount of research, and have an appt with a BK attorney soon, but wanted to see if anyone could give me an answer or suggestions on our situation. I will try to be as short as possible.

Long story short, we are stuck in a ballon note with an ARM about to go up next year. We are unable to refi and unable to sell. Yes, we were stupid. We have several credit cards, pretty much all maxed out, totalling about 10K. The home is old, and something always needs to be fixed. We really just want to walk away from it. My husbands income has gone down about 25%, and to top it all off, my stepson has come back to live with us (no, we aren't getting child support from his mother) We also have a 2 year old together, which is in a daycare center.

I have already done a rough calculation using the Means test, and we would most likely qualify for Chapter 7. If we do, and we file, would we be able to walk away from the house without owing a dime? We don't want to hold onto it and can't afford it. Obviously we know this is going to kill our credit, but we are up to our ears in debt and can't do it anymore.

We have also briefly researched the short sale option. However, we don't know any realtors. How would I go about finding one that can help w/a short sale? And if this were an option for us, would we owe the difference?

Any experience, knowledge or advice out there?

[ameliabedilia]

Have you talked to your bank about a short sale? 10k isn't that much to bk in reality. You could probably figure out a way to pay that back.

[erinmi]

Be careful of a short sale. We got stuck signing a letter stating that we would repay the difference at closing on our home when we sold it for less than we owed.

Most mortgage companies won't work too easily with you if you haven't been behind-we actually HAD to miss a payment to get them to help us with a short sale.

If you do decide to do a short sale, try and find a realtor who is familiar with the process, hindsight being 20/20, even though we loved our realtor, he was not experienced with short sales, which may be how we ended up with the bank coming after the money. You DON'T want to do it as a For Sale By Owner.

If you can get out of the house and not owe the difference, would you be able to pay off your cc debts in 3-5 years without BK? That was the rule of thumb for the lawyer we worked with about whether or not to file

[FreshLikeADaisy]

...If we do, and we file, would we be able to walk away from the house without owing a dime?

If there are no other complications, yes. You would do well to run this by the atty when you see him, and don't hesitate to get more consults with different attorneys (usually free) if anything he says doesn't jive with what you've already learned.

Although I agree with Amelia in principle, a house that is a money pit can be the straw that broke the camel's back, and why go 13 if you qualify for 7? I am almost grateful that my circumstances are as severe as they are, because I had no option but to take a 7 and missed that road entirely. Five years is a long time to be eating rice and beans, and you have more mouths and fewer dollars to boot. Don't let an atty talk you into a 13 if you qualify for, and would rather have, a 7. Good luck!

[soulprincess]

erinmi - Yes, hypothetically if we were to get out of the house owing nothing, we could pay off the cc debt on our own. We will soon be moving to a rental home and will be paying rougly $650 less than what our mortgage payment is. My worry is that we are already a month behind and received the letter of default from Countrywide. I just really want to get the ball rolling, whether we decide on the Ch 7 or the short sale. I do feel like a Ch 7 would be the final option. We do hope to own a home again in the future (when we are ready) and want to choose the option that is better suited for that.