New Member thinking of Ch7 BK, help!

[mrskal]

Hi, I am a new member and have been reading for the past three days straight! I do have quite a few questions and am hoping to get some advice. Here is the situation:

Live in Illinois, husband went to Florida for a job in February with the hopes of selling house here and following him when that was settled.

Underwater on house, owe 172 on first mortg. and 27 on a HELOC to a different bank. House worth 176 on zillow, so totally underwater. Do not want to keep house anyway. Not in a huge rush to get down there, would like to be there by Sept or October though.

15,500 in CC debt, maybe 600 on medical collections.

8,900 car loan, car worth 7-8 according to KBB.We are not set on keeping this car, but may want to. Payment of 348. Only reason to keep it is to let daughter take one of the others to college. Own two older cars worth about 8100 total on the very high side from KBB. Want to keep them.

We are current on everything accept 1st morgage and recieved Notice of Intent to foreclose on June 7. I had been behind just making payment to keep out of foreclosure until we decided what to do. Credit is pretty low due to juggling to pay everything, got the CC current, but let the mortgage go.

We plan on renting in Florida, not to worried about any credit dings or scores really, would like to buy a house in the future if possible 3-5 years down the road.

Only things that are holding me back from making that final decision is my work vehicle, 2006, I bought for $65 and owe $27, not sure of the real value of it though. I am going to try and figure that out tomorrow by contacting the company I bought it from. It is a specialized conversion van with all of my equipment in it. That is one thing I cannot (dont want to) let go, it is my work. I have a S-corp, but the van is titled in our name, so the lawyer said it is our asset. Also, we cashed out a 401k for about 9,000 and we have been using that for living expenses and want to use that toward the move and rent deposit in Florida. I also took 1,000 from that and made a loan to my business since it has not been making me much money this year.

Any insight on what I should or should not be doing? I think I should probably stop paying on the CC and the HELOC? Need to change banks, as it is the same bank that I have that loan with.

If my husband has comissions from his job coming, he did not turn in the paperwork yet, can they take that? It should have no effect in our qualifying for 7, I am pretty sure. We are not even close to the amount for Illinois.

How do they handle personal articles, do they want to know what your jewelery is and such? We dont have much, and pretty much all the furniture is older, or hand me down, no new TV's or anything like that.

Does it matter what you bought or did with the HELOC? I used 5k of it to put down on my work van.

I met with a lawyer yesterday that was definately not anyone I would use, probably should have trusted my instincts when I booked the appointment in the first place! LOL! Found a new one today that I really liked and will definately go with.

The lawyer told me about the short sale option with the house, and being able to negotiate dificiency's, since we dont really have a ton of CC debt, and if it did not work out we could still do BK after, I really just think I would rather put it all behind though.

Any and all advice is appreciated! Sorry if it was so long, it is a lot to deal with, as I am sure you all know, I feel like a burden has been lifted just by going to a lawyer finally.

[iv65536]

One thing to consider is that based on the circumstances you have described, you will be using Illinois exemptions if you file in 2010 or 2011, be it in Florida or Illinois.

[mrskal]

One thing to consider is that based on the circumstances you have described, you will be using Illinois exemptions if you file in 2010 or 2011, be it in Florida or Illinois.

Yes, from what I have read that is the case. I think Illinois has better exemptions anyway, if I understand what I have read. LOL The whole homestead thing confuses me. Florida says "

222.01 - Real or personal property, including mobile or modular home and condominium, to unlimited value."
It also has an exemption for personal property up to 1,000. Listed seperately, In the first part it says personal property to unlimited value? Huh?
The vehicle exemption is only 1,000 in Illinois it is 2,400 can be doubled.. Illinois also has a wild card of 4,000 can be doubled.

My lawyer did tell me to contact a BK lawyer in Florida and ask about what the exemptions are there. See where the best benefit is, and I told him I read about having to file with Illinois exemptions, because we were only in Florida a short time. He said there are ways around that. Not to sure what that means though. I did find this though:

"In order for people in Florida to qualify for bankruptcy exemptions, they must meet a residency requirement. The claimant (the party requesting a bankruptcy) must have resided in Florida prior to the bankruptcy action. Domicile in Florida refers to an intent to reside in the state for a long period of time, usually indefinitely. In re Dwyer 305 B.R. 582, 585 (Bkrtcy. M.D. Fla., 2004). The way an individual proves domicile is not necessarily through actual residence but by simply showing that one has an address, driver's license, voter registration or other qualifications. Florida is pretty liberal with allowing people filing for bankruptcy to claim exemptions."

[StartingOver08]

Florida exemptions are extremely small. Look at them here: http://www.legalconsumer.com/index_local.php?ZIP=32822

There is a residency requirement to filing BK. Residency requirements. If a filer has lived in their current state for less than 2 years, then the bankruptcy provisions of the previous state of residence are applied. (This is to prevent debtors from moving to a state with more favorable bankruptcy laws and then immediately filing bankruptcy.) Used quote from this site: https://www.dcu.org/streetwise/september2006.html

You can read the actual code which is a little more complex, but the above is the gist of the requirement. http://www.doney.net/bkcode/

[mrskal]

Well, we decided to file Ch 7. Now it seems real, going to meet with the lawyer tomorrow, he said I will get a packet. What will happen next? Fill out the papers and then he files when I am done? At the time he files do they give a date for the meeting? I am afraid to spend any money or pay any bills now. I just paid a car payment last week, a gas bill and a bill for lab tests. Is that going to be a problem? I have a bill with my dentist around $100, can I pay it? I need to get in for more work, but don't know if I should. Sorry to sound stupid, but it is all I can think about in these last few days.

[iv65536]

You will need to discuss with your attorney:
(1) the timing of the filing
(2) your pre-BK filing
(3) the credit counseling that is required before you can file
(4) what you plan to do with your home
(5) what you plan to do with pre-petition medical bills (such as the dentist bill)
(6) the details of what your exemptions will look like and how low to get your bank account(s)
(7) plans for cash you can't exempt (possibly pay the dentist bill, spend it on necessities, doctor appointments, new glasses/contacts if needed, etc.)
(8) what not to do in the interim

You are currently in the pre-filing phase - it will likely be a couple months before you are ready to file.

Also, the 401(k) is exempt as is. Don't touch it.

As for the state-specific exemptions, you would be using the exemptions in the state where you lived for most of a period ending two years prior to filing.

[mrskal]

So here I am a few weeks later from when I first posted. I am thinking I have time before I need to file.

I have money in my checking account, right now about 4K. This was froma 401K that we cashed out a few months back so we had money for moving expenses and first months rent and deposit. Also,it is building as the paychecks get deposited.

It does not look like that money is safe from the BK7, so I am thinking, we should just go ahead and rent sooner than later and use the money for that. Then file a few months later.

I dont think I am in any hurry, because up this is the first month of not paying my CC's, car loan, and HELOC. I have recieved the letter from the mortgage on the 1st, that states they are starting the process of foreclosure. Is there anything I should worry about with any of these items, as far as waiting about 3-4 months to do the BK? They are not going to come after me are they? That way I will have moved already and the money spent would be toward housing.

I talked with the lawyer that I have consulted with, and was going to hire, and he said, I need to spend that money down before I file. That would leave me with no money for the move, and is that is why I am trying to find a better way to do this.
I am getting so confuesed and lost in this whole thing. Any help is appreciated.

[mrskal]

No response? In searching more, I also found that if I file in Florida when I am moved and living there, the income test is lower. We would probably be pretty close to not qualifying. Ugh. I should probably go back to my original plan now and get it filed and over with? Out of the $4000 in the bank as of today, I will be spending approx $750-$925 on my dogs surgery this week. Then another paycheck gets deposited on Thursday of approximately $1200. I am to the point where I cant even think anymore, and nothing makes sense. Thank you in advance for any response.

[Silver26]

You need to spend your account down to whatever the exemption is for your state before you file on allowable expenses. Otherwise anything above that amount becomes property of the trustee. Are you not planning on keeping the vehicle? If your going to keep it you need to keep making payments. You should be fine for a couple of months before anyone would even consider suing you.

[mrskal]

No, I am not planning on keeping this vehicle, I am in fact trying to trade the one I owe money on for a mini van, and if that happens it will not create any equity. If I am able to do that, I will reaffirm the new one.
If that does not happen I am going to just let it go, and try to get something after the Bk. I am going to go through my exemptions again, I think the lawyer is valuing my other two cars that I own too high. I am already using part of my wild card on those two cars. He said use the KBB for the trade in value, at the high(excellent condition) side, and I really dont think I could get that. Thank you.

[tcreegan]

Illinois filing, what are the exemptions,

Hello Mrs Kal,

You will have to file in Illinois, and want to, much better than current conditions in Florida.

Spending down your account can include sec. dep./advance rent on new place.

The money from the 401 get back into the 401. It is completely protected there.

Find out the exemptions from Illinois, that will tell you what property/cars/etc you can keep.

The equity in the work van may put you over the limit of your vehicle exemption....but you may be able to exempt it as "tools of the trade" instead of a vehicle. Something to ask your lawyer.

Pay the dentist, pay the vet. These are hardly fraudulent. If the trustee wants, they can pull these payments back and redistribute them, but I seriously doubt this will happen. Even if it does, you are not liable.

Chap 7 general Timeline:

Take required class

Fill out paperwork for lawyer

Lawyer files your bankruptcy

Foreclosure stops, all collections stop

Car finance company, mortgage company may request a lift of the stay (so they can proceed with a repo.

341 meeting held

Reaffirmation is filed w/ court

Reaffirmation hearing happens

341 meeting of creditors

Trustee fills report on disposition of assets.

You negotiate with the 1st mortgage people, trying to get a "cash for keys" or some other negotiation where you turn the house over to them without a foreclosure happening. (deed in lieu)

60 to 90 to more than 90 depending on how busy the court is, you will be issued a discharge.

Relax, kick back, contemplate your new life.