Change of plans...but still need advice

[BrokeDavis]

Happy New Year all!!! I am writing because I originally wanted to file a chapter 13, but the monthly payment they're asking ($1150) is a lot for me to make right now. I have some equity in my home, but I'm okay walking away.

My car was already repossessed in June, and I have credit card and student loan debts. Recently I've decided on filing a chapter 7, since this way is a faster way for me to start rebuilding my credit. I want to start saving money as soon as I'm able to, but what will happen to the funds I already have in my possession when I file? It's not much but I have about $1500 in my accounts, and I know they told me to stop paying my one credit card since I'm going to file. Will the trustee take all of my money plus my tax return, if I get one?

If anyone has any input, I'd really appreciate it. I plan on saving that close to $1200 a month and out it to good use if I'm able. I also know there's a waiting period after discharge before I can try to buy a car or home, but any advice will help.

Thank you...

[bcohen]

If you qualify for a Chapter 7, you can file one, and if you can exempt the money in your bank accounts, you can keep it. Same with the tax refunds. If the money cannot fit within your state's exemption, then you will have to surrender it to the trustee unless you have spent it BEFORE you file, which is the smart thing to do. As with anything else, when it comes to bankruptcy, planning is key. You want to time the filing so that you will lose little or no assets when you file!

That being said, you won't be able to buy another house for a LONG time, and should therefore try to remain in your current one for as long as possible. Due to the large number of families who surrendered houses and condos in the foreclosure crisis, which were bought up by REIT's and turned into rentals, monthly rents far exceed monthly costs of ownership in many parts of Florida! Depending on where you live, it is possible that even a decent 1-bedroom apartment would cost more than your current monthly mortgage and property tax burden. Make sure you research this before you decide to surrender your house.

Also, remember that just because you include your mortgage as a debt in Chapter 7 bankruptcy does not automatically mean you will lose the house. You are allowed to "retain and pay", which means that you keep paying the mortgage and property taxes, and the lender cannot begin foreclosure.

[BrokeDavis]

Thank you bcohen for your response. The house is already in foreclosure...has been for about a year now. I've tried to remod with the original lender (BOA) and now with the current (Nationstar). Neither have been able to help me. I got ill back in 2011 which cause my income to change, then lost my job for about 9-10 months while I continued schooling. Now I've been working for 6 months now.

I have done incredible research and have seen that rent will be much more than the current mortgage payment. However, I am now comfortable to say I can easily afford the repayment plan. Will there still be an automatic stay with a chapter 7? My original plan was to file a 13 because that allows me to maintain residency and still clear things up. I also know with the 13, I won't be able to save ANYTHING...which is something I wanted to do seeing that I'll need a vehicle sometime in the future. So these are the things that I'm facing. The 13 might be best for me, just don't want to run into problems. to being able to afford payments.

[bcohen]

I see, the house is already in foreclosure. Chapter 7 will provide an automatic stay, which will delay foreclosure by at least 3 to 4 months, but will not prevent the lender from foreclosing. If you want to stop foreclosure and keep the house, you would need to file for Chapter 13. Remember that it is not the trustee, but the judge who has final word as to what your plan payment will be. If the trustee is asking too much, it is possible to challenge him and prevail.

[BrokeDavis]

I didn't know anything could be challenged. The payment is what my attorney told me he would present to them. I guess I can look into a way to make the 13 work. At least at the end I can sell the property.

[keepsmiling]

Sometimes 13er's post their income and expenses here and we help tweak them. If you'd like to try that perhaps some of the pros here will see something the attorney missed.

[AngelinaCat]

Hi BD: We initially tried for a CH13, but when I lost my FT job,and 'Hub lost his consulting work with our local city, we had no choice. You may want to consider a CH7.

Don't let the attorney push you into something you aren't comfortable with. This is one reason we advise consulting with at least three other attorneys before deciding on one. You may have picked one that only 'knows' CH13s, and is trying to push you in that direction.

My very best!!

[BrokeDavis]

Good morning,

Thank you everyone. I have consulted with various attorneys and have decided upon one that local and does bankruptcies only. He originally thought I wanted to do a 7, but because of my home and the equity (probably around $8K) I wanted to keep it.

As far as my income, After taxes I bring home around $1000 biweekly. My basic expenses (utilities and food) are around $500 but I spend over $300 in gas for transportation to and from work/school. I am about $20K behind in payments with the mortgage that has a balance of $69K. My car got repoed and has a balance of $10K after the resale, my credit card debt is around $15K, and around $5K medical. I used to have a credit score between 750-780 so I'm fairly responsible when it comes to debt. When I lost my job and tried to make arrangements with the bank, had I known I could've just kept paying them what I could and just make up later payments as I had extra money, I would've done that. Instead I played a song and dance with BofA only to be denied a remod in the end. My attorney said the $1150 payment is what I'm looking at, but it will drop to $700 if my remod goes through.

I'm start school again next week and I've considered joining the reserves to supplement my income. I just want to get myself back on track to where I was financially.

[keepmine]

Why on earth are you even worried about a 13 and your credit score when you're flat broke and about to start taking on new expenses like tutition and textbooks?
I'd think and pray long and hard about joining the reserves. There is always that risk of being called to active duty and put in the middle of a shooting war for a year at a time.

Only one way to get back on track financially and that's to make more money and at the same time elimenate all the debt you can with a Chapter 7.

[BrokeDavis]

Thank you for your input KM, but if you didn't catch above I was considering the 13 because I kinda need a roof over my head and the 13 allows that. No need to assume a person is flat broke because they need to file bankruptcy.

[keepmine]

Thank you for your input KM, but if you didn't catch above I was considering the 13 because I kinda need a roof over my head and the 13 allows that. No need to assume a person is flat broke because they need to file bankruptcy.

You're the one who posted that you make $2K/month and basic living expenses eat plus, the the $1150/month projected Chapter 13 plan eat that up.

If you've been in foreclosure for a year, you are way under water in that house. Even in a Chapter 13, not only would you have to be able to make the current loan payments but, any arreage would have to be repaid at 100%.
You just have something you can't afford.
Were I you, the money you save right now should be used to be certain that you have reliable transportation.Pay cash for something that is below whatever auto equity that Fl.exempts. Next, make sure you have health insurance either through your job or, the gov't healthcare exchange.
As to housing, stay where you are until you're evicted. If you have HOA fees, those that are pre-petition are discharged. Those that are created post petition you're still liable for so plan your filing accordingly.
It wouldn't hurt to interview other lawyers, lay out your situation and see what they sugest.

[BrokeDavis]

Right now my transportation is taking care of, it's just not in my name. Does anyone know the process of filing a 7, but staying in the house until discharge? I know there's an automatic stay, but will I have to move once the discharge is complete? Or can I stay in the property until they foreclose? I've read in some cases if will still be responsible to the home even if it's discharged in the 7 because it will still be in my name. This I don't quite understand. Also the HOA fees due for the property which is why the 2nd lender (Nationstar) said they couldn't move forward on my remod. I thought I'd qualify for a 3 yr plan, but I believe he stretched it to 5 to make the payments "affordable." I want to file before Feb...

[LadyInTheRed]

If you file a Chap 7 and want to stay, you just stay but mark on your statement of intention that you will surrender your home. The bank will either file for relief from automatic stay so they can continue the foreclsoure proceeding, or they will wait until your discharge. You own the property until they foreclose and can stay there until the foreclosure sale is complete, title transfers and you receive an eviction notice from the new owner. You will be responsible for any liability associated with the home for as long as you are on title (e.g., if a tree on your property falls onto a neighboring property, you could be held responsible for their damages). You will also be responsible for post-petition HOA fees.

Do you really have equity in your home when you take into account the arrearage, interest and penalties? If so, have you considered offering the bank a deed in liu of foreclosure? Could you avoid BK and handle your debt if it weren't for your mortgage?

If you don't have a car in your own name, buying one before filing BK may be a good idea, but only if you can afford it after discharge.

[BrokeDavis]

Thank you LITR, I guess after everything, the equity will be liquidated. I still have a chunk of debt that can be discharged, but am in a decent position that I feel I can slowly get things back in order. I don't think I'd qualify for a car with the repo under my name. I will have to look into the deed in lieu of, because I don't know how that works. It looks like I may have to rent an apartment for a year paying less the BK $1150 but more than my actual mortgage. It's a start to getting things in order.

[TheBajan]

Good morning,

Thank you everyone. I have consulted with various attorneys and have decided upon one that local and does bankruptcies only. He originally thought I wanted to do a 7, but because of my home and the equity (probably around $8K) I wanted to keep it.

As far as my income, After taxes I bring home around $1000 biweekly. My basic expenses (utilities and food) are around $500 but I spend over $300 in gas for transportation to and from work/school. I am about $20K behind in payments with the mortgage that has a balance of $69K. My car got repoed and has a balance of $10K after the resale, my credit card debt is around $15K, and around $5K medical. I used to have a credit score between 750-780 so I'm fairly responsible when it comes to debt. When I lost my job and tried to make arrangements with the bank, had I known I could've just kept paying them what I could and just make up later payments as I had extra money, I would've done that. Instead I played a song and dance with BofA only to be denied a remod in the end. My attorney said the $1150 payment is what I'm looking at, but it will drop to $700 if my remod goes through.

I'm start school again next week and I've considered joining the reserves to supplement my income. I just want to get myself back on track to where I was financially.

BrokeDavis,

Please don't take this as judgement or criticism because it's not. Based on the info you have presented here, with a take home income of only $2000 a month, the math just doesn't add up. You cannot afford a payment of $1150 along with your gas and other living expenses. Not to mention the many periodical expenses that come up you have not mentioned. You also have not mentioned how much your mortgage payment is but with the other expenses you did mention, there is no room for it. Even if you are paying the arrears through the ch 13, you will still have to make your normal mortgage payment. In addition to that, It is absolutely VITAL, CRITICAL, A MUST that you save money for an emergency while you are in a 13. If you don't, your plan WILL fail. I promise you that sometime during the next 3 to 5 years, you will have an unexpected expense or financial hardship arise. With the budget you are describing, you simply will not make it through.

I'm guessing the reason your atty is telling you the plan payment is so high is because he/she is including the arrears that you own on the mortgage. Right now, you are in arrears by nearly 30% of your total mortgage. That means that through the bk 13, you will attempting to catch that up in just a matter of 3 to 5 years! Frankly, it's an insurmountable task. It's time to cut your losses. My advice would be to go with a chapt 7, stay in the house until the bank simply forces you out, and just start over. If you can bank up some cash, do so. You will need it once you are looking for somewhere else to live.

You haven't mentioned your family situation but I am presuming you are single. If that is the case, you have more flexible options regarding renting and lowering those rental costs. I'm thinking in terms of finding a room-mate, or even renting a room rather than a house. It just depends on what your family situation is.

Best regards,
The Bajan