complicated question please help

[nichole04]

I really need someone to help me with this situation: I recently closed my business and had an inventory loan that was cross-collaterlized against my house with a HELOC. The inventory loan ballooned on 12/25/09 and now the bank is asking for my case # so they can forward it to their bk dept. but I can't file ch. 7 until 4/2/10 b/c I paid my dad back $3000 I borrowed from him on 4/1/09 and my lawyer wants me to wait until after this date so it will be longer than a year since I paid my dad.
The problem is that the bank with the inventory loan says they can't wait that long and will have to forward the loan to their forclosure dept. With this loan I have a total of 4 mortgages on my house which puts it really upside down. My lawyer isn't being very helpful in this situation and I need to know what to do. I also have to pay $20,000 to the inventory loan since this is the amount I received when I liquidated my business b/c the loan is against my home and all inventory and equipment. Should I call the bank back and ask them to give me until April to file in exchange for paying them the $20,000 now? After paying this amt. I will still owe the bank $27000 for the inventory loan. Or should I just go ahead and file ch. 7 and just have my dad pay back the money if the trustee forces the issue? I don't want to be forced into a ch. 13 if they start the forclosure process. I am current on my other 3 mortgages and plan on doing a ride-through and then try to settle the 2nd liens once I am discharged. My house appraised for $325,000 on 1/1/2010 and I owe $321,000 on 1st mort, $30,000 on cross-collateralized HELOC, $83,000 on 3rd mort, and then $27,000 after I pay the $20,000 to the inventory loan. I live in Georgia and filing in the northern district. They say the ch. 13 trustee is really tough here so I want to avoid it if at all possible. Please help. Thanks so much!

[Dst1]

Why does your attorney want you to wait an entire year for one 3K insider transaction? I don't understand that. I always thought the look back period was 90 days.

[OhioFiler]

The bank won't be able to accomplish anything before April. Don't waste your money paying them now if your intent is to negotiate after bk.

[BKDefender]

Dst1: The reach back period for an insider is 1 year. It's 90 days for a non-insider.

--William

[nichole04]

Is the one year period for an insider 1 year from date of filing or 1 year to your 341 meeting?

[BKDefender]

One year from the date of filing. Transfer look back periods are from the date of filing.

--William

[nichole04]

Thanks BKDefender. What do you think I should do about the inventory loan? I just don't want them to send it to the foreclosure dept and mess up my filing ch. 7.

[BKDefender]

Wow - I don't know where to start. If you subtract the cost for foreclosing on your home, the broker's cost, closing fees, etc, then your home is effectively underwater on the 1st loan, meaning that the HELOC could be considered wholly unsecured. If that's the case, then in a Chapter 13 you could strip off the HELOC, the 3rd mortgage, and the inventory loan. Even without subtracting that, you could strip off the 3rd mortgage and the inventory loan without paying any of it.

I would suggest you bring it up to them that if they foreclose on the loan that they will receive nothing after they pay the foreclosure fees, broker fees, etc, and pay off the 1st mortgage. See if that makes them realize that they're wasting money by foreclosing on the house when they won't get anything in the foreclosure. i.e. don't throw-away good money after bad.

--William

[nichole04]

Thanks BKDefender, But since I liquidated the inventory and the loan is against the inventory and my house don't I have to give them the $20,000 anyway? We are over the median income but we qualified for ch. 7 on the means test. If we can get discharged in ch 7 we will be getting rid of about $150,000 in unsecured debts. We want to try to settle the 2nd mortgages afterwards and keep the house. I just don't want to be in a payment plan for 5 years since we have 2 kids and they will be practically grown by the time we are discharged in ch 13. My son has special needs and it will be nearly impossible to be on such a tight budget. Do you think explaining this to the bank w/the inventory loan is the best and/or only option or should I just go ahead and file ch 7 and take the gamble that they will make my dad pay back the $3000 I paid him last April?

[OhioFiler]

Are your debts primarily personal or business?

[nichole04]

Most of the unsecured debt is business but a lot of it was put on my personal credit cards but they were used for the business. The inventory loan is for the business but the other 3 mortgages are personal-see above for amounts. Thanks so much!

[keepmine]

Why are you worried about foreclosure? The process will take months. You'll be filed way before that.
Listen to what others are telling you. Don't throw good money after bad. Just let the process play out. Once you file bk, an automatic stay halts all collection activity including foreclosure. You'll have your shot at negotating.

[nichole04]

I live in Georgia and lenders here can foreclose pretty fast from what I hear. My lawyer says I have to give them the $20,000 if we file ch. 7 since we liquidated the inventory. I have to do something with it before we file b/c we are getting back over $10,000 in a tax refund and $10,000 is all we can protect. I certainly don't want to give the $20,000 to the trustee but I can't settle this loan prior to filing bk b/c it will mess us up for qualifying for ch 7 since we are over the median income. Any other thoughts?

[keepmine]

Forecosure is a long drawn out process. Just because they start to foreclose does not mean you're out on the streets immediately.
Just don't panic. Talk with your lawyer about how much time you have.

[nichole04]

I am behind on the inventory loan by about $5000. Should I go ahead and pay this amount from the $20,000 since I have to give them this amount anyway to buy more time? My lawyer says that since the loan is against the inventory that I have to give the bank this money b/c we liquidated it for $20,000. The lady at the bank says that she can't foward the loan to their bk dept until I get a case # but we can't file till April. She said she can only hold it for about 20 more days before fowarding the loan to their foreclosure dept.