Preparing and Deciding-Need Advice

[bcohen]

Unless you REALLY want to move to another area, or the house is in terrible condition, I suggest you consider keeping the mortgage current, even though you have significant negative equity. If the modification is permanent, and your mortgage payments will remain at $700 per month, then even with factoring in property taxes, insurance, and upkeep, it probably costs you $950 to $1000 per month (on average) to live in the house. I very seriously doubt you could rent anything sufficient for a family of 4 for less than that, unless you are willing to live in a terrible neighborhood.

Stopping payments on your other debts (credit cards, payday loans, etc.) is a smart move, however. The creditors can't really do anything to you at this point, because it would take at least 6 months for them to charge off the debt, file a lawsuit, win a judgment, and begin collecting on said judgment, and that's if they are EXTREMELY aggressive. Most creditors are not that aggressive, and it sounds like you will have filed for bankruptcy by then anyways.

[brokehmowner]

If you get a summons for an unpaid credit card before you can file, make sure you file an answer and give notice to defend. Then request proof of the debt (there is a formal name for this, can't remember what it is). You can also try asking for a continuance once the court date nears. Just do all you can to avoid a judgment. Also be aware that some attorneys charge extra for removing a judgment, so you don't want it to get to that point. It probably won't though.

If you are intent on walking away, but want to extend the time before foreclosure, google mortgage hamster wheel game. Select the loansafe.org hit. It will give you a roadmap for delaying foreclosure as long as possible. We decided to stay in our home because of the excellent modification we got (mortgage cut almost in half), but we were still willing to walk if the under water 2nd decided to foreclose. Soon after we were discharged from chapter 7, the 2nd extinguished the loan, so that is now wiped out.

[Northstar]

The house is in great condition-we have made many improvements. The first mortgage payment is $703 which includes taxes and insurance. The second mortgage payment is $90 interest only. I understand by letting it go we may pay more in rent(almost a certainty). I have been wrestling with this decision. No matter what happens I will be late with the mortgage payment this month due to limited funds. I get paid next Friday so I could make it then. I'm hoping to file by the end of June. Will this protect me from a judgement? You mentioned that you filed a chapter 7 and wiped out a second mortgage? I thought that was only possible in a 13?

[keepmine]

The 11th curcuit will alow you to strip a 2nd in a Chapter 7.

If you file in June, and haven't been sued by now you should be safe from any legal action.

[Northstar]

I am in MN and not in the jurisdiction of the 11th circuit. I have not been sued since this is the first month I have missed payments. If I file and just pay the first, what is the likelihood of the second, which is also serviced by suntrust, proceeding with foreclosure?....sorry for all the questions, I just want to make the right decisions!

[LadyInTheRed]

You just stopped paying your credit cards and will have enough money to pay your attorney fees by June 1, right? Then, you have enough time to delay your filing until you can pay your attorney while still paying the $90 second mortgage. You have at least 90 days before anybody will sue you, and that would be quick. After a lawsuit is filed, it takes at least 30 days to get a judgment, and that would be quick.

But, I'm concerned that your 2nd mortgage is interest only. When the interest only period ends and your CCs have been discharged, will you be able to handle the payments on both mortgages? On second thought, maybe I'm not so concerned, as long as you don't reaffirm your mortgages. If your mortgages are discharged, and you later decide to walk away, you can live rent free for a while until one of the mortgage holders foreclose.

[Northstar]

By June 15 I will be able to file. After the CC's are discharged I will have extra cash. Additionally, once this BK is complete my stay at home wife(who will not be filing) should be back at work. I will not reaffirm anything. I like my neighborhood, other than the noise, our garage, and limited space, but it is affordable and safe. Suntrust, in the past, has said it will be amendable to modifying the second IO mortgage which will cease being an IO in 2016. Ladyinthered, I value and appreciate your input. What is your advice?

[LadyInTheRed]

What is your advice?

Keep both mortgages current and file when you have enough to pay your attorney. Based on the info you've provided, I see no reason to rush.

[bcohen]

Keep both mortgages current and file when you have enough to pay your attorney. Based on the info you've provided, I see no reason to rush.

I second this advice. Once you quit paying your unsecured debts, you should be able to keep both mortgages current, and still save up to pay your attorney. Even if it takes 6 months or a year before you can file, it is extremely unlikely that any of your unsecured creditors would do anything to you by then. Of course, you should not reaffirm either mortgage, because when the 2nd eventually resets (if you can't negotiate a modification with them) then you might want to walk at that point in time.

[brokehmowner]

The house is in great condition-we have made many improvements. The first mortgage payment is $703 which includes taxes and insurance. The second mortgage payment is $90 interest only. I understand by letting it go we may pay more in rent(almost a certainty). I have been wrestling with this decision. No matter what happens I will be late with the mortgage payment this month due to limited funds. I get paid next Friday so I could make it then. I'm hoping to file by the end of June. Will this protect me from a judgement? You mentioned that you filed a chapter 7 and wiped out a second mortgage? I thought that was only possible in a 13?

It was not lien stripped. The lender, Green Tree, extinguished it. I couldn't find a link for Green Tree, but here is Bank of America's notice of it. They were the investor for my Green Tree 2nd. Of course I didn't breathe easy until I saw it for myself in the land records section of our courthouse. It is my understanding that the lender gets a lump sum for each 2nd that they extinguish under this program. Bank of America was not the only servicer/investor to participate in this program. Chase was one, can't think of the others. http://newsroom.bankofamerica.com/pr...ebt-extinguish

[Northstar]

That's an awesome deal brokehmowner! Suntrust probably would never do that for me.

I didn't sleep well last night thinking about this compromised financial position I face. Hope brighter days are ahead god willing. I have been thinking about this a lot. Would a chapter 13 with a 2nd mortgage wipeout and a payment plan be better than a chapter 7 and continuing to stay current on the mortgage? Sorry for all the questions! You are all great for helping me through this. Thanks so much!

[LadyInTheRed]

I didn't sleep well last night thinking about this compromised financial position I face. Hope brighter days are ahead god willing.

Things will get better. BK will help you take control of your finances.

I have been thinking about this a lot. Would a chapter 13 with a 2nd mortgage wipeout and a payment plan be better than a chapter 7 and continuing to stay current on the mortgage? Sorry for all the questions! You are all great for helping me through this. Thanks so much!

That may be a good option. Your household income is under median for your household size, right? That would mean you could do a 3 year plan. Have your attorney run the numbers to see what your Chap 13 plan would look like.

[Northstar]

Another update. I will be able to pay my mortgage(s) payment(s) this Friday. Suntrust has been calling and I have explained to them that I will not be able to pay until then. Shouldn't one call be enough? Anyways, I had my first call from an unsecured creditor today. I pushed answer than immediately pressed end. I did not speak to anyone, and I would not have answered at all, but I'm anticipating a call back from a job interview I recently had. The only reason I know it was a creditor calling is from a google search on the number. I'm just wondering how often and the timetable they will begin to get more aggressive? I'm 20 days late on 1 card. 10-15 days late on 3. How do you deal with these calls? Thanks again!

[Drazil65]

Search "Google Voice" here, set it up on your phone/computer. It makes life a whole lot easier, be sure to identify yourself in your greeting when setting it up so the creditors know they have the right person. It worked for us and they never called around "looking" for us. Good Luck!

[Northstar]

Thanks for all of the great advice and support! I have a couple of issues I am trying to resolve right now. I mentioned in another post that I have 1 card on automatic payments. I have to call to cancel the autopay, but with my intention not to pay at all, what is the right approach when discussing this? I'd be removing autopay and not paying at all. The other issue I'm concerned about is future employment. Obviously I will never be able to get a job with a security clearance, but are there roadblocks elsewhere? I was reading some post on another website and some people were less than reassuring regarding bankruptcy and the life thereafter.