Tax Refund > pay mortgage

[sportsnut]

Wife and I filed for Ch 7 last month and successfully had 341 Meeting moved back a couple weeks to April 14th (I will be out of town on business trip on initially scheduled April 1 341 Meeting). Anyways, we are considered "No Asset" case (just verified this on Pacer). I will be filing our taxes in the next few days and expect a few thousand back. My question is, I would like to use this rebate to pay our mortgage payment(s) as we are close to 30 days behind now. (We are keeping our house and 2 cars via the BK)

Is this legitimate? I plan on using whatever refund I get back to make payments on our assets that we are keeping (house & 2 cars). Not use it on anything else (i.e., vacation, toys, etc.).

Will I be ok? Thanks for anyone's help/advice!

[HHM]

First, why are you even behind on the mortgage at the point of filing BK...you realize that in order to keep the house you need to be current on the mortgage.

Since you ALREADY filed, the BK estate (i.e. the trustee) has first claim on the tax refund, unless your state allows an exemption for it. Basically, unless there is some sort of wild card exemption or cash exemption to cover that tax refund, you can pretty much kiss that money good bye.

[sportsnut]

Thanks for your response.

When we filed (last day of Feb) we were current on mortgage and 2 cars. However, because of other things that came up, we were unable to pay the mortgage for March. So, here we are on the 29th of March and still haven't made the payment. We hope to make it in the next week (which will make us current by the time we get to the 341 Meeting on the 14th).

So, what you're saying is that the Trustee will definitely be taking the $$ from the refund? If I get the deposit in my bank...DO NOT make any car/mortgage payments with it? I'm in California...do you know if there is a wildcard/exemption for refunds in CA?

Thanks again for your help.

[keepmine]

You need to ask your lawyer what the policy on refunds is in your district.

[sportsnut]

We're filing Pro Se.

[CindyLou]

check your district's website. or call your trustee's office and ask.

[phoenyx]

If you're filing Pro Se, you need to be very familiar with the bankruptcy process and what exemptions are allowed in California, and whether you are allowed to use the federal exemptions instead.

I'm concerned for you, because you said you filed your Chapter 7 pro se last month, but are now asking about exemptions in California. Exemptions are something you need to be very familiar with by your initial filing.

I would hate to see you have a worse bankruptcy than you deserve. I definately recommend getting a detailed Chapter 7 book. I recommend the Nolo How to File Chapter 7 Bankruptcy book. (Note I have no affiliation with them in any way, I just think it's a good book, and is generally recognized as one of the books to read when filing pro se.) Granted, the book won't discuss the policy for refunds in your district which is also important, but I believe it will give you a lot of good information -- it sure did for me!


That all being said, here is a link to what exemptions are allowed in California: http://www.thebankruptcysite.org/exe...alifornia.html. It looks like you can choose between two sets of state exemptions, but cannot use the federal exemptions. You should go through these in detail to make sure which set of exemptions is most benefitial for you. Anything in your already filed Chapter 7 paperwork can be easily amended, if necessary. It appears that California's second set of state exemptions allows a wildcard of $1,100 plus the unused portion of your homestead/burial plot exemption which is up to $20,725. However, the California second set of state exemptions is not necessarily best for you -- you have to look through all of your assets, and not just decide on the wildcard factor alone. Also note that even when filing married bankruptcy, California's second set of state exemption amounts may not be doubled.

[HHM]

Regarding CA exemptions, you are correct, the only way to protect a cash asset (like a tax refund) is to use system 2 and NOT need to use the homestead exemption to protect you home. System 2 is designed for renters and those individuals that are upside down or about even on their home.

[sportsnut]

Thanks for all your help.

I went through the Exemptions thoroughly before filing and decided on System 1 for CA because my wife and I both have IRA accounts that would not have been protected if we went with System II (at least that's how I understood it). Also, our home is upside down because of the recent housing market conditions so it didn't really matter what system we went with.

Bottom line, I went with System II because of the IRA accounts. It appears the System I does not have any exemptions for cash/tax refunds so it appears we'll lose the tax refund. However, we're much better off with everything else the BK will do. Therefore, I can stomach the loss of the tax refund.

Another question regarding the house and being current on payments in order to keep it...does the trustee require something from us or the lender verifying that the account is paid up and on time? What if I'm still in my grace period for the payment being due (i.e., 341 Meeting on 14th...grace period on payment is through 15th but haven't made payment yet).

Just curious to see how the plan works.

Oh, one more thing, when I "filed" I had our timeshare listed as that we're going to keep it. However, we just can't afford it and are going to put it in the BK. What paperwork will I need to amend or create in order to amend my original filing paperwork?

Thank you again for all of your help. I really appreciate it.

[FreshLikeADaisy]

Sportsnut, I'm really wondering how you managed to file pro se. Please don't be offended or hesitate to ask your questions, it's just that as a pro se filer myself I am staggered that you aren't familiar with your forms, exemptions, etc.

Again, please don't take this as criticism. I only say this because I am deeply concerned about your ability to manage your bk if you should hit a snag (from your mortgage lender, for instance: if you're not current during your filing they can request a Motion for Lift of Stay in order to begin foreclosure proceedings). Yes, you can amend your filing to include your timeshare, but I'm wondering why you don't think it's already in there, either as an asset or as a secured debt: if you filed correctly you can amend your Statement of Intention (assuming the timeshare is a secured debt), but if you include something in your Statement of Intention that you didn't list as a debt elsewhere in your schedules, you're going to want to amend those too.

Please allow me to second Phoenyx's suggestion that you get the Nolo Press book (the link is in my sig; I have no affiliation, I just think it's a damn good book) and read it thoroughly. It will tell you exactly how to do an amendment and what forms to amend.... but before you can do an amendment you have to understand what/how you already filed, which is why I strongly recommend the book. There's a Dummies series book on Ch7 that I have heard is really good as well, but either way right now I think you're missing some basics that you're going to need a better knowledge of before you attempt a pro se amendment.

I wish you well!!!

[MajorMike]

Wow, and how can you be behind on your mortgage since you stopped paying on your other debts already. If you can't afford your mortgage payment even after that, it is NOT a good sign.
This is one reason I strongly suggest NOT going Pro Se unless you are like FLAD and do your homework PRIOR to even considering it.
I'd be scared to death for you...

[sportsnut]

A couple things:

I filed with the intent to "Reaffirm" the timeshare. However, now I want to just include it (meaning I don't want to "reaffirm"). That's what I meant by including it in the BK. It was definitely listed in the BK.

I did include everything in the BK and chose the two cars and the house to "Reaffirm" (and I included the timeshare which now I want to let it go). So, will I need to change some paperwork or submit a new document to make this happen?

Also, I plan on calling our lender (Countrywide) tomorrow to discuss our current situation with them. Just a thought...with all of the houses these lenders are losing, and losing bigtime $$, I would think that they would be willing to work with me in order to keep the house and "not" trigger a "Lift of Stay" to start foreclosure proceedings. I've always heard that the absolute last thing a lender wants is a house back. They would rather we try and make payments to stay in the home. And, this was before this major housing crisis. However, this is just a gut feeling. Nevertheless, is it up to the lender to make me give up the house or is it up to the trustee (in my particular situation; i want to keep the house)? I wasn't able to make the payment because of other things that came up.

I knew the exemptions that I went with pre-filing and went with Schedule I because of the IRA accounts. I'm confident I filed correctly but didn't really consider the tax refund because I figured I would lose it anyway. I was just hoping for the best.

Anyways, thanks again for everyone's responses. What's the worst that can happen, really? They take my house? Maybe that will be a blessing. I just want the BK to happen. I'll face the consequences that come with it.

[phoenyx]

I don't know specifically if you would have to do anything to let the timeshare go, but I know in general that your statement of intention in your bankruptcy filing is just that -- a statement of intention, not a binding agreement. Again, I don't know if you have to amend anything, but you should be able to get out of the timeshare OK, as far as I know.

As for the house, you definately have a decision to make. As hard as it may be, unless you reliably have an increase in income coming ASAP, keeping the house might just put you back into financial trouble again after the bankruptcy is done. And, then, you would be in a situation of not being able to file another bankruptcy for a while.

If you decide you really want to keep the house, I'm not sure if Countrywide will talk to you now, or if they will wait until the bankruptcy is done. Some creditors simply won't talk to you during the bankruptcy process, protecting themselves so there is no way you can claim they violated the stay. Some creditors won't even expect payments during the bankruptcy process, and ask for whatever missed payments to be given after the bankruptcy is closed (missed payments during the process that they didn't accept/cash.)

[diviaruba]