Paying off unsecured debt pre-bankruptcy

[kudumaned]

Hi badhouse, i agree with what your thinking. Here in Michigan i am in the same position, home worth approx. 290K (down 45%) total of mortgages 380K 0wed. My HELOC matures end of this month and the bank wants to raise the rate to 9.67% changing my monthly payment total from 2650- to 3000-, on a house 100K underwater, yea right! Stopping payment next month., getting ducks in a row for BK. In Michigan the banks are going after you for defficiencys whether due to foreclosure or short sale, so why not take a free ride until they boot you. Afterall i did put 130K of my own money into this place. Why wait 10 years for the value to come back when you can get something for 1/2 price now. Good luck.

[BCA2009]

Badhouse, Are your sure you even qualify for BK? You said you have a stable job with high income. Do you mean over the median? From what I understand most districts wont let you include your mortgage payment on your means test if you are surrendering your home.

If you indicate your intent to keep the home (and change your mind later to let it go), then you have no debt to BK.

I must be missing something, it doesn't sound like you qualify for BK.

[badhouse]

I have stable income not high income. I am about 5k below median income for Oregon.

[badhouse]

My point about the stable income is that banks typically want to see a hardship like a cut in pay or a reduction in hours before they approve a short sale. I am dubious that they will approve mine absent such circumstances. Worth a try but I am preparing for the worst.

[BCA2009]

I agree, in most cases, short sales only benefit the bank, and you have to do all of the legwork.

If you are to the point of filing BK anyway, just quit making payments, they will become more agreeable to a short sale then. If not then save up your money by living rent free and file BK on the deficiency after the foreclosure.

[LSUTiger32]

How much upside down will you be? You can settle a foreclosure deficiency down the line for pennies on the dollar. I am glad you are thinking, just don't rush into this because I don't think BK is your best option given your situation. If you had $50K in CC debt on top I could understand but we are only really discussing the house.

Have you tried working with the mortgage company on a possible modification? They might be willing to work with you to avoid a short sale or a foreclosure.

[charismamill]

You should speak to a bankruptcy attorney to better determine your options. However, if you plan on filing for bankruptcy, you should not pay off your debts. It would be best to use that money to pay your expenses (e.g., food, gas for your car, clothes).