Is it time to throw in the towel?

[Bob Walker]

For the past couple of months my wife and I have been straddled with dealing with hits from all sides, I am thinking the time is at hand at throwing in the towel, but I'll ask for the groups advice.

Here is what we are up against right now:

- BK discharge was in 2007 (So we are 3 years in to 10 years of bad credit already)
- Our home is worth about $325k.
- We owe $250k on the 1st and $57k on the 2nd. ($307 total).
- Chapter 7 BK did not discharge my wife's Student Loan in the amount of $19,000.
- Collection Agency is about to garnish my wife's wages to collect the $19,000.
- Chapter 7 BK did not discharge the 2nd mortgage, so we still owe $57k unless house sale doesn't cover the total then we would owe $0.
- Chapter 7 BK at this time doesn't appear to have discharged old tax debt though covered under the law.
- Found out today that Federal Tax Lien has been filed for over $25k.
- Total debts we're on the hook for: $351k.

Possibilities:
- Get the tax lien removed due to incorrect amount and go from there.
- Debt settlement of student loan.
- Wife can quit job, but would cause hardship. I know we could then get the tax lien removed if hardship.
- Let the house go into foreclosure and take the sting to our credit for another 4 years.

Our goal prior to having the tax lien filed was to sell our home, not keep it. We want to be able to sell it to cover the two loans and move into an apartment where we can really get a fresh financial start and possibly buy again in three years.

It is my belief that we are at a crossroads in our life and could use some real life experience advice here folks. So please don't hold back and any quick replies are much appreciated.

Thanks

P.S. What's eerie about all this is I know it's only money, but our family bond has always been very strong and we have already been through much, much worse than this in the past.

[Bob Walker]

I was just reading a reply on another thread (http://www.bkforum.com/showthread.php?t=52703) where supposedly taking the sting of a Ch 7 is supposed to give one a Fresh Start. I don't believe we got one if we couldn't discharge some of the most punishing debt we've had for years. I can easily say "The law has to change", but I don't make the laws and my vote these days still does help us in the long run.

I'm still under the impression of going the route of foreclosure to bail out the rest of the debt that didn't get discharged. Heck, if the Trustee was going to take our home to pay this debt when the case was still open it probably wouldn't have hurt so much to make the choice now.

[HHM]

First
A bankruptcy DOES NOT affect your credit for 10 years.

Second
Did you actually expect the chapter 7 to discharge your student loans or second mortgage. That is never the case.

Third
Tax liens are a problem. What did you expect? They are treated like any other secured debt, the underlying personal responsibility for the debt is eliminated but the lien against the property remains.

Did you file pro se or with an attorney?

Is your home really worth that much, many people over estimate the value of their home in this market. In your circumstances, a fresh start would have been to dump the house from the beginning; if you would have done that, the IRS would have released their lien with a phone call. As for student loans, that is always problem.

[Bob Walker]

response.

First
A bankruptcy DOES NOT affect your credit for 10 years.

Well, that's OK then.

Second
Did you actually expect the chapter 7 to discharge your student loans or second mortgage. That is never the case.

Actually, yes. We were led to believe at the time that they would be by an attorney. As you can see, we know now that they weren't. Lesson learned: Never believe everything your attorney tells you, check for yourself!

Third
Tax liens are a problem. What did you expect? They are treated like any other secured debt, the underlying personal responsibility for the debt is eliminated but the lien against the property remains.

The tax lien didn't come into play until just recently. But I think it's a good thing that it came in at this time, it will make it much easier for us to decide to dump the house.

Did you file pro se or with an attorney?

Pro se

Is your home really worth that much, many people over estimate the value of their home in this market.

Houses in our area are still selling fast and about that much since we are so close to a big military installation.

In your circumstances, a fresh start would have been to dump the house from the beginning; if you would have done that, the IRS would have released their lien with a phone call. As for student loans, that is always problem.

We didn't have the tax lien until just recently.

It does sound like though we can eliminate all three debts with either a Short Sale or Foreclosure. Of course by Short Sale the bank would have to get enough to cover the lien and as much of it's loan and probably very little would be left for the 2nd mortgage. Correct?

[Snax]

IMO, short sales are more trouble than they are worth. It's a way for the banks to keep you living in the house and doing the maintenance while providing little additional benefit to you. Foreclosure and short sales are still major marks on your credit, so unless you anticipate being able, and need to stay in the home longer, with a short sale, I've yet to see a good reason to bother.