Mortgage PMT WAAYYYY over allowance....what can UST or Judge do?

[alorth]

I want to point out that in our Ch. 7 case, we DO plan on re-affirming our Mortgage. We in NO WAY want to leave this house. But our Mortgage PMT is $2410/month....a HUGE part of our obligation on the Means Test. The allowance here is something like $850/month. So we are over the allowance by something like $1560/month. This is helping us to qualify for a 7, obviously, since we are counting the real world expenses on our schedules. But can the UST object to the Payment somehow? What can he do about it?? It is a creditor which we are going to re-affirm. This is NOT a case of us just "saying" we plan on staying in the house to get a CH 7 discharge. We are On Time on our House payment to this day....same for our 2 old used car payments. The House is most important to us. Can the UST or Judge MAKE us move? Can they make us have to abandon the house, thus forcing the Creditor of the Mortgage to be out their money? Doesn't seem like that could be legal, to me. But what do I know...I'd like the opinion of someone who might be knowledgeable about such things.

[keepmine]

The bk code allows you to use your actual mortgage payment as an expense.

[HHM]

It depends on the district. But Keepmine is right, you are allowed to deduct the entire amount as a secured debt.

But many districts have a choke point, a point at which the judge says it is unreasonable for a person to have that high a mortgage payment at the detriment to other creditors.

You need an attorney to navigate this issue.

[alorth]

Hmmm....'choke point'.

It will be interesting to see what that is, and if it comes up. Supposedly the Judge in my case is switching jurisdictions at the top of the Year, and our atty. is less comfortable with the new judge we will be assigned. He is very familiar with both, but seems to think the new judge will view the high dollar amount of the mortgage in a harsher light when taken with the Totality of Circumstances.

This sounds like it could be trouble.

[IamOld]

But do you have alorth, any equity...I almost seems to me if there is no equity then there is nothing for the creditors and in fact than by forcing you to leave the house then the secured creditor would be impaired...

[ValleYum]

But you could afford your mortgage and your bills until you had health issues and could no longer work, correct?

[alorth]

But do you have alorth, any equity...I almost seems to me if there is no equity then there is nothing for the creditors and in fact than by forcing you to leave the house then the secured creditor would be impaired...

That is correct. The house is underwater, though I am not officially aware of by how much. We have not had an appraisal done since our last refi which I believe was 3 years ago. Maybe 2. We took all the equity we did have out of the home to try and stay afloat. FAIL.

But the SEV has stayed about the same, so on initial glance, it may look like we would 'break even' in trying to sell the home, but my guess is we are under by about 30K or more with condition and local comps taken into account.

That is why I posed the query. Can a Judge or UST "Impair" a secured creditor by forcing sale of the security? I would think that it would be illegal for them to do so, but the law is weird in some things. I wouldn't be that surprised by anything.

[HHM]

When you get to totality of circumstances, there are good facts in bad facts. So it will depend on the district and judge as to how they view the issue. A narrow approach may take issue with the high mortgage payment from a disposable income standpoint, if the mortgage is very high above average (even of actual numbers for the area, not just IRS standards) the court could take issue with it regardless of the equity position of the house, the argument being, if you had a more typical housing expense, your creditors could get paid something (the IRS does this ALL THE TIME with their collection standards and how it abuses people that owe back tax). A more expansive approach would consider things like equity, the circumstances as to why you have that mortgage, your ability to pay your living expenses (e.g. how can you still afford it). etc.

The caution is that the means test allows you take the secured debt expense, so you take it. The issue is whether the expense will survive an objection.

[alorth]

But you could afford your mortgage and your bills until you had health issues and could no longer work, correct?

To be precise, we really couldn't, as we were essentially 'robbing Peter to pay Paul', transferring balances to low interest rate cards, but never really making any headway paying them down. Driving cars that were more expensive than we should have. My health issues simply made matters much worse. The increased Interest Rates and Payments of ALL of our CC's, as well as the banks' rescinding of more than a Hundred Thousand Dollars of available credit lines, were the biggest impetus to get the ball rolling. Then we sold off anything we had of value to try and stay afloat, to try and come up with a plan. We re-fi'd the house twice. Then that was no longer an option as home values plummeted.

(The house is very special to us as we bought it new, and it is our HOME, where our daughter was born, and we intend to stay here forever, if we can.)

One thing on top of the other led us to where we are now. Stupidity and lack of foresight on our part, coupled with the country's economic disaster, and the tightening of credit. We thought we could go on forever the way things were back in 2006 and before. Its amazing how fast it can all fall apart. And add a child to the mix in 2007. So, its never one thing, I think. For us, it was "The Perfect Storm" of circumstances.

Fact is, right now, we are still dipping slightly into savings, what very little there is left after paying the attorney, to stay on budget. And we are continuing to find ways to cut back and save, while paying the House Payment, costs for 2 old used cars, including repairs, utilities, child costs, and skyrocketing health care costs. We haven't used credit in about a year now, and for me personally, its been a year and a half.

If a UST can find ANY DI in our budget, I will fall over, because its not there. I cannot see how in the world we could formulate a 13 plan....WITH us staying in the house. Of course, IF they can somehow make us abandon the house, I guess then they would have money to pay others in a 13 Plan, and we become indentured servants for 5 years. So that's the lynchpin....whether or not we are allowed to stay in The House..

[AZNoName]

I know you might not want to hear this, but if you can't afford the house, you can't afford it. Taking emotion out of the equation, bankruptcy is a business decision, and keeping/surrendering the house should be a part of that business decision.

We're surrendering our home of 10 years. We had our 2 children while living there. Our first night we spent there together was our wedding night (yes, we were a little old fashioned!) But if it just doesnt make dollars and sense, you might need to look at your options.

We're thinking of this as a new chapter in our lives. A new adventure. Hopefully we can find a place just as nice, but either way, it will be OUR home

[alorth]

From my point of view, we CAN afford it....just so long as we can discharge the unsecured CC debt in this Ch. 7.

I have absolutely no desire to give up my home, just so I can do a Chapter 13 plan and send money to the UNSECURED creditors. I am more than happy to keep making my house payments....and car payments, too, for that matter.

And as far as I'm concerned, I never plan on using a Credit Card another day in my life. And after a year and a half of not doing so, things are basically working out fine.

I look at it this way. We are living now just the same as we would be living if they would have just progressed our case to a Discharge, without throwing the Pres. of Abuse in our way.

We are still living check to check, with a small cushion in the bank, but credit is not needed, nor wanted.

Just give me my fresh start and let my family be on its way! I truly don't think we'd ever complete a CH. 13 5 yr. plan.

[Drazil65]

I don't think any of us REALLY wants to give up our homes for whatever reasons (we also have alot of emotion attached to this home as our 8 year does) and its hurting us to walk away from it. We have had it on the market since summer at a $40,000 reduced price (from a current appraisal) in hopes we could sell it before our discharge. The bottom line is, you are filing bankruptcy for a reason and you will have to sacrifice. Sorry I do not mean to be harsh but it is what it is, in bankruptcy you do not get to make the rules, you cannot afford the house at the expense of the other obligations you incurred.

Also, in your present state of affairs if you had everything else discharges BUT were still paying that mortgage payment and you had a little (or big) hiccup in your lives how would you get through it? You state you would still be living paycheck to paycheck and alot has to do with that payment. As hard as it is please sit down and come to terms with the fact that you cannot afford this house and all that comes with taking care of it (something else that needs to be figured in). It will be hard but you are putting limits on your recovery and in the long run you might lose it anyway. I wish you the best and everyone here feels your pain, been there done that. Home is where you make it as long as you and your family are together.

[helpmeout]

As long as you are current, you should be able to use the entire mortgage amount since it is secured.

If I were you, I would take a long hard look at your budget and whether or not you can realistically keep the house. With a mortgage that high, it wouldn't surprise me if it was a major contributing factor to why you are here. Even if you are determined to keep the house, don't lock yourself in by re-affirming the mortgage. You can always just stay and pay.

[helpmeout]

From my point of view, we CAN afford it....just so long as we can discharge the unsecured CC debt in this Ch. 7.

I have absolutely no desire to give up my home, just so I can do a Chapter 13 plan and send money to the UNSECURED creditors. I am more than happy to keep making my house payments....and car payments, too, for that matter.

If you can afford your house payment that is over $2K a month, how come you were having financial difficulty? You need to take your emotions out of the equation (you are not, you are making a decision based solely on emotion) and make the best financial decision for you and your family. Even if that means you give up the house. At the very least, don't re-affirm the mortgage. This will keep your options open.

[TBA]

Think about it this way...

You may be able to afford your house, but why? I would venture to say that you are probably estimating a bit low as far as negative equity in the house to try to protect your emotions. Even if it is only 30k, how long will it take you to pay that so that you are now no longer in a negative equity position (this will depend on your loan type, but remember that most of your mortgage payment is interest and not principal - so the answer is... a really long time)? Wouldnt you rather save that 2k a month and use it for a better place to live?

Yes - it will take time to qualify for a mortgage again. Yes - it wont be the original house you had. Yes - you may have to live in an apartment or rent a house once the Foreclosure is complete (why not live there rent free until they complete it and save that money?) for a bit of time until you can qualify... But i am willing to bet you will be able to buy a much better house for less money than you currently have invested in the house you are trying to save, as RE prices are still falling, and even if they turn tomorrow, the market will be rather volatile and have very very small gains for some time (at least, in my opinion).

As others have already pointed out, BK is a business decision. Take your emotions out of it. Consider the financial advantages to letting go of the house. Consider the financial stresses of keeping the house. And get some real numbers - i would tell you to go to the county appraisers website (keep in mind, these are usually a year behind) to get an idea of sales in your area or even call a RE agent and have them give you a recommended selling price to get an idea of how much your house is worth. Once you have real numbers in front of you, you may be able to make a rational decision and not an emotional one.

Many people have gone through the same emotions you are experiencing right now. Listen to them. Their knowledge is powerful. But in the end, only you can make the right decision for you and your family. GL.