Can we save the house, car

[outsidetool]

Oh what a mess.
My wife holds the house mortgage individually. About 8 months ago she did a "modification" on a 5-year plan, with a giant
balloon payment at the end. The intent of the credit union was to give her the opportunity to "re-establish" a good payment
history, and then get refinanced during that time frame.

[spidge]

What is the question?

[outsidetool]

Can we save the house, car

Oh what a mess.
My wife holds the house mortgage individually. About 8 months ago she did a "modification" on a 5-year plan, with a giant
balloon payment at the end. There is a 1st and 2nd mortgage. The intent of the credit union was to give her the opportunity to "re-establish" a good payment history, and then get refinanced during that time frame.
Well, things have not gone well in other areas. She has been taking out payday lender loans, is behind on other bills, and is hanging by a thread with keeping the mortgage payments within 30-days. I just found out how in the hole she is today. I am thinking of a BK filing, but the situation with the house is concerning. Her income is now short $400/month which I cannot cover...so I'm seeing disaster slowly develop.
Anyone have any suggestions? Could a ch 7 discharge the load of unsecured debt and leave the house intact? Would a Ch 13 be better?
The house is underwater by about $20,000. If we walk away, or lose the house, we will still have to pay about the same monthly to even rent another house or apartment. Any suggestions would be appreciated.

[keepmine]

What is the question?

Yeah-some details would help.
How much equity are in the car and home vs what your state exempts? Are you current on both?

[outsidetool]

Wow. don't know what happened on my initial post, but about half of it was missing! So I understand why you all are wondering what I was asking.
So, some details: owed on house--$173k, approx. value--$158k (1st = $145k; 2nd = $28k)
Owed on car--$25k, 2011 VW Tiguan, approx value $22k
Unsecured cc debt: $4000 Payday lenders/loan consolidation lenders debt: $8000
Note that the house 1st is currently a 5-year mod since May, with a giant balloon payment at the end. Mortgage is just barely current; wife just told me of her
plight today when she could not make the 1st payment for January.
The question: can a ch 7 or 13 save the house and car?
My concerns: Since there is a mod on the 1st with that balloon payment, what is the impact of a BK? Obviously needs to be refi'd before that balloon is due. I would imagine that would be difficult if in a ch 13 plan.
Thanks for any insights!

[spidge]

Sorry to hear of your troubles. Is your wife aware of the issues and willing to commit? You will need her on the same page. Without her commitment the waters will be quite rough.

The schedules for your state will determine if a ch 7 or 13 is required, but if you have arrears from the house in the plan it would be a 13. It is rare that the debtor can decide. So if she is on board then try out a few attorneys to see where you stand.

Keeping an underwater house poses other questions. Are values in your area on the way up? Is the home in disrepair? Are there tax benefits to keeping the house?

[spidge]

Please ask a moderator to combine the threads.

A balloon payment could be OK. Is it at the end of the loan or at the end of the five years? If at the end of the loan it does give you a chance to refinance at a later date and build credit now in preparation.

[keepmine]

These are secured loans. They have to be paid in either chapter if you wish to keep them.
The auto loan can be helped {prehaps} with a 722 redemption loan.

[LadyInTheRed]

If the mortgage and car payments are kept current, a Chap 7 could eliminate the unsecured debt without the loss of the home or the car (assuming you qualify for a 7). However, it doesn't sound like that would solve your big problem which is the balloon payment. Could you make the house and car payments if the unsecured debt was gone?

A Chap 13 can help pay arrears after default, but you still have to keep up on the payments in addition to making the plan payment.

Maybe what is needed is a Chap 7 followed at some point by a Chap 13. Maybe your wife could file a Chap 7 to get rid of her unsecured debt, then you could file a Chap 13 together. Without knowing your entire financial picture, it's hard know how and if that will work. There are important details from another thread that you are leaving out here. I can see why you did, but your 2008 Chap 7 filing and the fact that it is your wife who is considering BK are important details. You and your wife need to consult with some experienced bankruptcy attorneys to discuss possible options. If you want to help save the house, for BK purposes, you may have to look at your finances more jointly than you have been.

[outsidetool]

Thanks to LadyintheRed and others who have given me plenty to think about. We will be trying to meet with an atty this week.

[bcohen]

I would like to add that keeping your house is much more important than keeping your wife's car. It sounds like the biggest source of financial distress is the payday loans and car loan. The house is slightly underwater, but not enough to justify moving and paying rent, which could be higher than the monthly mortgage payment, taxes and insurance. In some parts of the country, monthly rents far exceed monthly costs of ownership, so keep this in mind!

It sounds like your wife cannot afford to keep paying for the car, nor can she afford to keep paying the payday loan. It may be in her interest (and yours too) for her to stop paying these things, let them go to collections, and keep driving the car until it eventually gets repossessed. Once that happens, you and her can always buy an inexpensive "beater car" for her to drive, if she needs a car.

Eventually, the lender will sell the car at auction, and they may or may not file a lawsuit for the deficiency balance. If a lawsuit is filed, then at that point, your wife can file a Chapter 7 to discharge the unsecured debts. Soon before the balloon payment is due, she (and possibly you, jointly) can file a Chapter 13, and use the bankruptcy court to compel the mortgage lender to accept payments which will be determined by the Court. As long as the plan payments are made, the lender will not be able to foreclose.