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Can we file ch. 7 when behind on first mortgage and pending a loan mod?

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    Can we file ch. 7 when behind on first mortgage and pending a loan mod?

    Orignally my husband and I thought we would be filing ch. 13, now I am hoping that perhaps could do ch. 7 instead. Trying to decide which direction to go and what steps to take to get there. Met with 1 lawyer last week- very confusing as I was meeting with him regarding a FDCPA violation and he kind of broadsided us with th bk idea. A little about our situation:
    My husband was unemployed 4 of the last 6 months (now currently employed).

    We did the means test on our own online and are under by a few hundred dollars. I normally only work PT, but I worked FT + while my husband was out to try to make up some of the difference. I am now back to PT, so I don't think our income will be any greater if we wait a few months to file anything.

    We are about 10K behind on first mortgage- currently waiting to see if we can do a loan mode. ALS is the bank- I haven't heard positive things about people getting a loan mod with them- it's all a mess with paperwork being lost and requested 500 times.

    We were a few months behind on the 2nd mortgage- unbeknownst to us the bank (USAA) filed an insurance claim on it and it was granted. So now United Guranty has our 2nd mortgage. We made an arrangement to pay a higher monthly payment for the next 6 months to catch up on what we were behind on and then payments would go down after that.

    We have approx $30k in cc/unsecured debt.

    We have payment arrangements on 2 cc accounts and our past HOA dues.

    Our house is most likely NOT worth more than what we owe on the first mortgage.

    From the research I have done, it seems like we can't really (or it's not a good idea) to file Ch. 7 if we are behind on the first mortgage.
    Should we wait to see if they can do a loan mod before we consider filing bk at all?
    Should we stop paying the cc arrangements, 2nd mortgage and the HOA to try to catch up on the first mortgage and then try to file Ch. 7? I am just worried that then they would quickly get an order for garnishment or freezing our bank accounts before we would get caught up on the 1st and be able to file Ch. 7. The arrangements we have are lawfirms/creditors that either already obtained judgement or a stipulated judgement.

    We do plan on meeting with 1-2 other lawyers in the very near future.
    Thanks so much for your help! I have learned so much already in the past week of being here.

    #2
    Your situation sounds similar to ours, except both of us are full time employed and slightly over on means. We have two mortgages, just filed last week and we are 3 months behind on both mortgages (we actually got our notice of default on 2nd mortgage same week we filed!) I don't know any reason it's bad to file when you are behind. Are you definitely planning to stay in your home? We originally were looking into a 13 and had NO plans on including our home or cars in the BK, now we are doing a 7 and letting the house go (we are $100K below value on a $160,000 loan).

    If you are sure you are going to file BK at all, STOP paying all cc's now. We also did the payment arrangement on one card and when I told the attorney that she said I should have stopped it immediately and I could have closed my checking account to do so.

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      #3
      Hi sealpup!

      I don't live in the same circuit as you but we filed our 7 on Friday and are 3 months behind on our mortgage with a modification requested from Chase. We don't have a second mortgage. Our lawyer never said a word about this being an issue at all.

      I know there are some really smart folks who post on here from Colorado - I am sure they can give you some awesome circuit-specific advice!!
      ~~ Filed Over Median Income Chapter 7: 12/17/2010 ~~ 341 Held: 1/12/2011 ~~ Discharged: 03/16/2011 ~~
      Not an attorney - just an opinionated woman.

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        #4
        Hi all,

        No need for knowledgable Colo folks (gets me off the hook, whew) The current or behind issue is not state or circuit-specific, it depends on the lender.

        At 10K behind, the lender holds all the cards. Yes/No on a loan mod and on what terms, Yes/No on a reaffirmation in BK, and on what terms, and Yes/No on a foreclosure.

        Some questions to ask yourself: w/o a loan mod, is keeping the house affordable and a financially good deal? What terms on the loan mod make it affordable and a financially good deal? (affordable means making the payment w/o scrimping and still have $ to put into a savings acct)

        Then it is time to get some straight answers from your lender, ALS. And apparently that is not their strong suit. Not sure I would want to risk 10K w/o a firm answer from the lender.

        The best scenario is to get a great deal on a loan mod, then file BK, stay current through and after, lender is OK with that.

        On another note (no pun intended)...

        Our house is most likely NOT worth more than what we owe on the first mortgage. ...then the 2nd is essentially worthless, if you want to throw $ at it, save it up and get them to settle for 5-10%

        Really glad to see you are looking at several attorneys, the wisdom of the forum is to shop around 'till you find a good fit. Here is my 'public service announcement:'

        After reading plenty of posts, these seem to be the major sticking points....
        Communication: phone/email/face-to-face, secretary/paralegal/attorney, turnaround time on responses
        Organizaton/work ethic: dot all i's, cross all t's or 'good enough,' document filed ASAP or 'before the deadline'
        Competence: know the local trustees, judges, filed cases like yours, up-to-date on relevant court rulings
        Retainer/Fee: exactly what is covered, what is extra, what to expect as 'extra'


        Good luck to you, whatever path you take, keep posting, lots of good folks here to help you out!

        Tom in Colo
        Ch7 filed 5/12/2010.....341 meeting 6/30/2010....report of no distribution 8/15/2010.....discharged 10/01/2010.....closed 11/09/2010

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