Please analyze my situation - shopping BK lawyers next week

[Steve08087]

Current situation:

Mtg 1 = 276K (2100/mo)
Mtg 2 = 15K (128/mo)
Car 1 = 3K bal (311/mo)
Car 2 = 8K bal (338/mo)
C.C. debt = 42K (min. 1300/mo)
Student loans = 83K (all deferred or in forbearance)

Home is worth maybe $ 235K now.

All utilities threatening to shut off...

Home & Auto Insurance payments due...

Considering pulling out 5K of my 20K in my 401K, to pay up utilities, insurance, auto maintenance (tires, brakes, tune-ups), and resume Autism Therapy services for our son.

I anticipate about $4,500 tax refund for 2009 when I do file - filed an extension in April - just haven't filed it yet.

My wife doesn't work, and I just went back to work - earning $3800/mo NET INCOME.

I'm married with 2 kids in New Jersey, one of which has Autism. When I can afford services for him it's about $75 per 30 min session for therapists in our area. We have stopped this (elective) therapy just recently due to finances.

Out of work for 8 months (July-March), stopped paying BOA Home Loans in October - missed 8 payments of $2200/mo interest only. Just stopped paying C.C. in March, survived til now on unemployment $2200/mo, $9K 2008 tax refund last October, and a $10K insurance settlement. Still paying car loans - now on the 29th day past due.

I was thinking that debt settlement may work - until I read (on this site) that it is worse on my credit than BK 7 would be.

BK13 may not be an option for me, even if I wanted it.

I was served today by BOA, and read that I have 30 days to respond to their Attorneys to see if I qualify for a 6-month forbearance (which stops their case against me - it says), and participate in the NJ Court Mandated Foreclosure Mediation Program. So will this buy me more 6 months in my home before the foreclosure process starts again?

I'm afraid lawyers may steer me to BK (or too soon) for their benefit - even if there are other options.. also - I don't want to be forced out of my home sooner than I need to - if waiting or delaying BK would assist me.

Not sure here... All ideas / input welcome.

If your story is at all similar to mine - PLEASE SHARE !

Thanks. Steve.

[momofthree]

Since you are now working, I would suggest NOT pulling money from your 401k--those are exempt funds in a bk (can't be touched) and since you're not paying your mortgages or credit cards, that $3800 you'll make this month should catch you up on most of those expenses that you have mentioned.

As a side note, I have a son with ASD as well and we have seen tremendous improvement in him with the DAN! protocol. It can be pricey--I think we spent around $3000 last year just on testing and such to find out which treatments to try, but once we got him started on his special diet, injections, and supplements, he's almost like a "normal" but quirky kid now and the ongoing treatment only comes out to about $100 a month... I know it doesn't work for everyone, but I always mention it when I get the chance because we've had such a great experience with it.

Good luck in your journey. Keep us posted!

[Majakat]

If you file chapter 13 you could strip the second off the house and save your home, if you can afford the 1st? and want to stay there?

I would agree do not take money out of the 401k - file your taxes get that money and spend it on exempt items -

I am not an expert, but i would get in to see an atty asap and see what you can do.

[SMinGA]

I'd say first step: call BofA's retention department and apply for a mod. First step would be going over income/expense information by phone. Make it clear you lost your job for X months but now you're back at work. They'll have you fax check stubs, bank statements, etc. etc. etc. The 'processing' should also mean they will take your account out of active collections. (I applied for a BofA mod mid April, that is the process I have gone thru so far.)

Next step: Have you considered whether you can truly afford the home you are in? $2100 1st mortgage on $3800 net income is really not doable unless there is a likelihood of more income happening pretty soon.

You would likely be able to file bankruptcy without too much difficulty. Ch. 13 would allow you to 'save' the house by spreading out the past due payments over 3-5 years, and even allow you to 'strip' the 2nd since your home is worth less than the first. But you'd have to be able to fund a plan with enough of a payment to resolve the arrears AND still make your 1st mortgage payment. I honestly don't see how that is possible. I figure 8 payments x $2100 = $16,800 in arrears. You could include your vehicles in the plan for another $11,000 priority debt (meaning they get paid in full, you no longer make direct car payments). But to pay off $27,800 over 60 months you'd need to pay ~$500 per month or more. (5-10% of it goes to the trustee.) So $500 + $2100 regular mortgage leaves only $1200 a month for groceries, utilities, car insurance & gas, medical out of pocket costs, etc. etc. etc.

If you choose to give up the house - can you find a rental for less than the $2100/mo? Ch. 7 could also be an option, depending on the big picture of income less expenses. The main purpose of a ch. 7 is to allow you to start over financially, wiping out the past debt. Depending on your state exemptions, and the value of your cars, you could probably keep both without issue.

[SMinGA]

Yikes, just noticed this. So these are not included in the 1st payment of $2100? Are you contemplating trying to keep the house? With the #s I think its just not possible. (Don't mean to be harsh, but sometimes a reality check is therapeutic.)

Current situation:

Home & Auto Insurance payments due...

I don't know the time line involved for your state, but for the moment perhaps the best gameplan is to handle the necessary expenses (utilities would be one) and plan to stay in the house as long as you can to save up money to move & rent. File the taxes, forget about trying to pay the mortgages. You could probably even skip the home insurance/taxes. (Doublecheck with a local attorney on that one, but I believe they would be eligible for discharge?)

Schedule consultations with a few bankruptcy attorneys, but leave your checkbook at home. (So you don't feel compelled to leave a retainer before you're actually ready to commit to a particular attorney.) Discuss your income & expenses, find out about your state's exemptions and district particulars. Choose an attorney based on who you feel comfortable with, one who gives your case time & attention and seems to know what they're doing.

One game plan would be to prepare to file - but hold off on actually filing until just before an actual foreclosure sale. Then file, stop the sale, and buy more time. Work on lining up a rental, and move when you have to...

[Steve08087]

Thank you to ALL - so far - your feedback is not harsh at all... its constructive and I appreciate the time you took to try and help me see the big picture here.

The thought of moving out rattles my cage - but all along my wife and I have said that we have too big a house (Size & Loan Bal) for our small, one-income family. I could take on a 2nd job to afford this place, and still be house-poor forever.

To keep the house - we would need a substantial Loan Mod, or take on a 2nd job. Though part of the problem is that it costs so much to live in this big house, Utility expenses to heat or air condition run 250/mo, plus real estate taxes are $8K a year. etc etc

Also the $2100 1st mortgage is interest-only for 2-3 more years (5 YR ARM), then what... P & I on the 1st loan amount would be at least $2700/mo (incl the $650/mo property tax bill). Perhaps it's not realistic to kill ourselves financially for just this house, when we need to also focus on our son's expensive Autism treatments. While we love the neighborhood, its safe here, etc. It's just not going to work long term - unless we could get the Loan Mod way down - to 200K. Not sure how that works exactly.

To MomOfThree - We are looking into Homeo-therapy & DAN treatments again, we tried the Diet & oral chelation for one year, but it became too expensive and we saw no change in him.

[SMinGA]

My (very limited) knowledge of loan mods is that they do away with the interest only, and do a fixed rate w/ step-ups. Such as 2% interest for 5 years, then +1% per year until you reach a max rate of 5%.

With your $8k per year taxes + interest, its probably not possible (regardless of a loan mod) to put your mortgage in a reasonable zone based on your income.

I would however still contact and ask BofA to start the loan mod process, as if you were trying to save the house, as it will buy you time. Time is good. Though they might determine that your income is not sufficient for the modification...

[Majakat]

Ooof - if that is interest only and you have 8k in tax a year - truthfully, as much as I love my home (which is too big and cost me 350/mo in gas/elec) If I were under that burden of expenditure, I would have to leave it - sadly, but realistically...

Where are you? What could you rent a place for?

[2manybills]

Steve, I would say the best thing you can do from your family is to file, let go of the burden of all of that debt. Concentrate on helping your son and doing what's best for your family.

Once you file, it will stop any foreclosure proceeding and buy you some time in your home to save money should a renegotiation of your mortgage not work out. They may not negotiate until after discharge or they may not ever negotiate, but I think your sanity is worth more than a house.

[Steve08087]

re: Renting

We're in NJ - near Philadelphia.
The rents here for 2-3 BR home are about 1400-1600/mo. for something nice, in a working class, safe neighborhood. We really need to stay in the same community so that our sons' schools and programs do not change. That creates another burden - to find something "nice" in just one community. I'm optimistic - it's certainly doable.