Newbie and got questions on chptr7 BK in CA

[johnjan2009]

I'm a newbie in this site and I thought of asking your consensus if I could qualify for chptr7 bankruptcy with all debt discharge including heloc/2nd loan but still keep my existing home:

Debts:
1st mort - $700k (mo. of $2600 including escrow)
2nd mort - $135k
car loan - $15k
credit cards - $60k (most of them were give to collection agencies already)

monthly income for a family of 3 is only $7700(gross) in California and will become $5200 after tax.

I consider filing chpter7 since there is no way I can keep up with my 1st mortgage if I still pay my 2nd loan and credit cards thru a chptr13 repayment plan. I wanted to keep my home,car protect my 401k, but discharge all debts including 2nd loan/heloc.

I really appreciate anyone's advise or inputs on above.

thnks, J

[momofthree]

What is your home currently worth?

Are you on an interest-only loan right now? Or a modification? That payment is impossibly low for a $700k balance.

What do you mean by "income will become $5200 after tax?" What is your net now? Why is your withholding so high? $2500/mo is a huge amount to have withheld. Do you normally receive a tax refund, owe taxes, or break even?

[johnjan2009]

Hi momofthree,pls see below,
What is your home currently worth? >> $450k
Are you on an interest-only loan right now? Or a modification? That payment is impossibly low for a $700k balance. >> this is after modification($60k is piggyback and not amortized)
What do you mean by "income will become $5200 after tax?" What is your net now? Why is your withholding so high? $2500/mo is a huge amount to have withheld. Do you normally receive a tax refund, owe taxes, or break even? >> If I pay mortgage there is refund. I didn't pay mortgage the whole year last year and I'm almost break even. Well, increase health insurance prem, etc contributes with my low net income. Single income family.

I appreciate any advise if chptr7 is possible or not. My goal is to keep home/car/401k, discharge all other debts including 2nd loan/heloc.

Anyone else has thoughts? Feel free to let me know.

thanks, J

[geye]

I'm pretty new to all this, but I thought it was impossible to discharge the home equity loan in a chapter 7; I thought this was done only in a 13?

[tcreegan]

Do Means Test

Hello JohnJan2009,

Step 1: You can find means test calculators online. Or get the real one from your courts website. Fill this out and see if you qualify for Chap 7

Step 2: To file Chap 7 you have to take a class from an agency approved by your bankruptcy court. Take this class, it will answer many questions.

Keeping your home will be very questionable. To keep it you will have to reaffirm the mortgage and convince a BK attorney and/or a judge it is in your best interests. This will not happen with a 450k house with a 700k loan on it. Not a chance.

Keeping the car will be easier depending on how much the car is worth and the exemption amount in your state (if paid off) Or what the loan is and who your financed through.

All retirement qualified 401's are completely protected.

Most likely scenario: lose house, lose cc debt, keep car, keep 401

But do the means test and take the class before anything else,

Tom in Colo

[tcreegan]

Update!!

If you and the mortgage company can agree and sign a reaffirmation, you might be able to keep the house regardless of what the BK court does. Ask a local lawyer if this is happening in your BK district.

2nd mortgages are not wiped out in a chap 7, they can be reaffirmed just like a 1st mortgage. Or......risky here.....you can not reaffirm with them hoping they will not foreclose b/c all the money from the sale would go to the 1st, leaving none for the 2nd.

Downside is 2nd will put a lien on the property. This means that if it is sold or transferred at future date, the 2nd has to be paid off at that time.