Newbie question about strategy

[tjsmiley]

Hello everyone, seems you all have strong knowledge of the process of BK so I really need some advice. I am the definition of BANKRUPT. I need help on a couple of issues.

I am filing for BK soon. I plan to keep my house ("stay and pay") and surrender my car if that's the best way to do it.

1) If I "stay and pay", can I walk away from the house 2 years down the road? In 2 years I will lose a portion of my income and won't be able to comfortably afford it anymore. I originally planned on selling it at that time, but due to falling house prices I am now $20,000 underwater on it. Selling won't be possible.

2) About my car....my current interest rate is 7.25%. It's a 2010, I owe $25,000 and the car is worth $19,000. So selling it to get a less expensive vehicle isn't possible either. I should get rid of it, but not sure how to buy a new one. No money for a down payment, credit is shot already. Even if I found someone willing to finance me now, is it ok to do that right before filing? Is it better for me to keep a decent rate/high payment, or risk a high interest rate for a vehicle that's about half the price of what I have? I am current on payments and have never missed one.

Any help is appreciated!

[scorpion35]

if u file BK and don't reaffirm your mortgage ,u can pay and stay as long as u want and in 2 years u can walk away free and clear and owe $0

[backtoschool]

Staying and paying for two years is an option if you file bk do not reaffirm your mortgage, but keep paying on it anyway. As for the car, the trustee most likely would not let you reaffirm a car that much underwater anyway. It is probably best to turn it in. It takes a couple of months for the lift of stay and then the repo orders to happen, so stop paying on the car after you file bk, don't reaffirm it, drive in it until they come for it, and wait as long as you can to get a new car. The longer you wait after discharge to apply for auto financing, the better rate you will get.

[OhioFiler]

Your home strategy is sound. I would suggest you consider stopping the payment of the mortgage soon after you are discharged from bankruptcy. If you are planning to walk away from the home in 2 years you can most likely stop paying in a few months and drag the foreclosure/eviction process out until the date you planned to leave. I would check the local courts to see how long the process typically takes.

As to the car, you may need the car payment as an expense to qualify for Chapter 7. In that case I would keep the car and stop paying after discharge. You could probably keep the car 3 months without making a payment before the repossession is complete. Those funds could be used as a downpayment on a more affordable used car. Sure you'll pay a higher interest rate but a higher rate on a lower cost car won't have that much impact on your budget.

[tjsmiley]

Thanks for the replies. I live in Texas. I think the foreclosure process is fairly quick here, so I'm not sure I can stop paying so soon. I'll keep looking into that. My car, I didn't know it would take 3 months for them to repo. That will definitely give me time to save money for a down payment. My rate is 7% now, and I'll probably be looking at 18% down the road, but that may be all I can do.

Thanks again!!

[tcreegan]

...you might be surprised tjsmiley, some people around here have gotten some decent rates right out of BK