Chap 7 & 13 at same time?????

[HELP4HOME]

I really hope that I can find help on this forum. It looks as those you guys offer a lot of advice. Forums are a wonderful place for people to go in need!!! ANY advice would be TRUELY appreciated!

I will try not to drag this out too much - but I am very confused on options. We are in Ohio, and my husband owned a mortgage company from 2002-2008. We were a LLC. Needless to say, it is over. He put 110% into this company and employed about 65 people. We are very responsible bill payers and have always kept good credit. We have always made 2, sometime 3 payments on a CC a month with extra income we were earning to keep our credit good and maintain low balances. Then came the downturn in the housing industry, making it extremely difficult to close loans. We started using credit more and more, although still making monthly payments.

We have taken out a lot of credit PERSONALLY for the business. While the company was becoming fully established, we used our credit to get credit cards for the company. These credit cards were used for company purposes, yet in our personal names, which makes us liable for these large balances. If we were to even attempt to pay off these balances, we would spend our lifetime paying for a company which is no longer in existance. Obviously our ONLY option is to file Chapter 7.

Our Bk attorney (we are in process of filing) has suggested that we do a Chap 7-business/consumer bk. Which ultimaltely would be great to have these discharged. Again, we would have NEVER wanted to do this, but have no choice. We obtained a 2nd mortgage on our home in 2006 for money for our building that we bought for the company. Looking back...STUPID - but we can't change it.

We owe $197k on our first mortgage. We have paid close to $60,000 in additional principal over the last 5 years. Our second is close to $200k. First is with Countrywide, second is with Homecomings. Our attorney advised us that if we want to do a workout, they won't even respond until we are 90 days late, nor care. They would basically assume that if we have managed to make payments thus far, we could probably find a way to continue. Well, that is what we have done. Our last payment on the 1st and 2nd were made in June.

Countrywide has now filed their complaint with the county courts and we have 28 days to respond. WE DO NOT WANT TO LOSE OUR HOME. I completely understand that we have to be "punished" in some sense for filing bk...but it sucks so bad that because we lost our company due solely to the economy, my children are going to lose their home

Here are my questions:

1. Is it possible to file Chapter 7 bk on the business, and a 13 personally - at the same time. If so, is it possible that our credit used for the company in our personal name (all unsecured), if proved was used for company expenses, could be discharged in the Chapter 7 business bk?

2. Then, with the credit that is truly our personal credit, file a 13 and be able to keep our home with a loan modification? The homes in our neighborhood are selling for around $299,000 - $315,000 and we owe close to $400k! Houses are sitting on the market for 18 mos - 2 years until owners have no other option but to go way down in asking price.

3. How helpful is a workout? Has anyone had any luck with these two mortgage companies? The first just sent us paperwork for the loss mitigation dept., and we are wondering if we should be filling these out (obviously with our attorney involved). With our first being so low, is Countrywide even going to want to work with us, or are they going to "hope" that we go into foreclosure b/c they know they will get their money back? We actually hurt ourselves making so many additional principle payments. Trying to do the right thing...coming back to BITE us!

I don't know if this is even possible or not. I am awaiting to hear from my attorney (wondering at this point what I am paying $5k for...) We have not filed yet, so we can take any route we choose to. Our attorney said Ch 13's are the biggest pain, and he suggests not doing it. But if there is a chance to stay in our house at an affordable mortgage...we don't care how much of a pain it is. Is it a pain for him, or us?

I am sorry this is so long with so many questions. If anyone knows anything, please help me.

Thank you!

[BROKENN]

Hi and Welcome!
Well you have a lot going on here and you really need to discuss all of this with your atty. You have enough questions that I would make a list and an appt!

First off, I am not sure that you should skip making mortgage payments if you want to keep the house. Others will chime in. I know the market is changing a mile a minute.
Are the current payments do-able in the future?
A C13 may be poosible, but it is hard to see your whole picture. Do go see your atty!

[FloridaGuy]

Hi Help4home,

Brokenn has some good advice. Make a list of questions, and get to your attorney. If you havn't already... check other lawyers, too. Get second opionions, especially from lawyers who do complicated situations with both biz & personal BK's.

We are in a similar situation with Biz & personal, but we have decided we will surrender our home. The business is still in operation, and there are technicalities being able to close/sell it during the BK. I know we won't have enough income to support the payments.

Make sure you read through the forum here about Chapter 13. Once you are on a plan... it can be a very tight (financially) road to follow. Especially these days, with increasing food, fuel, etc. costs.

[spell]

Is the biz closed? If so, there's not much any creditors of the business can do about those debts now. Typically, a ch7 for the biz isn't even necessary.

But likely, you signed personal guarantees for a bunch of the biz debt. That's where your personal ch13 comes in. That amount of home equity is typically enough to need a ch13 to protect the home as an asset. What are the exemption levels in your state?

[r.m]

I3. How helpful is a workout?

A workout can make a dramatic difference IF you do it properly. It's a bit of a juggling act to play the lienholders separately, but that's what you need to do to get the best results.

I3. Has anyone had any luck with these two mortgage companies?

Yes. I'm on a first-name basis with several negotiators at both companies.

I3. The first just sent us paperwork for the loss mitigation dept., and we are wondering if we should be filling these out (obviously with our attorney involved).

Okay, so... what have you done to determine whether or not your attorney is qualified to assist you in getting the best results?

Do you have a list of references whom you've called?

Exactly how many clients has this attorney helped in dealing with loss mitigation?

What percentage have kept their homes?

How many have obtained a loan modification vs. a repayment plan?

I think that if you haven't gotten satisfactory answers to these questions, then you don't really have an expert here.

BK attorneys want to file BK's, not negotiate loan workouts.

I3.With our first being so low, is Countrywide even going to want to work with us, or are they going to "hope" that we go into foreclosure b/c they know they will get their money back?

The size of the first lien may not be as much of an obstacle as you think.

I3. I am awaiting to hear from my attorney (wondering at this point what I am paying $5k for...) We have not filed yet, so we can take any route we choose to. Our attorney said Ch 13's are the biggest pain, and he suggests not doing it. But if there is a chance to stay in our house at an affordable mortgage...we don't care how much of a pain it is. Is it a pain for him, or us?

Okay, 3 issues here.

1- $5k? $5k?!? For what, exactly? That's a big fee. Your attorney may be doing you a favor here by being unresponsive. Take a moment here and get a second or third opinion.

2- Speaking of "waiting" to hear from your attorney... These relationships typically don't get better with age. They tend to become less responsive with the passage of time. So, this is your high watermark for timeliness. Are you okay with that?

3- Yeah, 13's are not only a pain, but the failure rate is quite high. However, a 13 may be helpful with you being as upside-down as you are. OTOH, a 7 in conjunction with a couple heavy-duty mods could also be the ticket. Hard to know without more financial details.

If you'd like, you can see my observations on the topic of using Chapter 13 to [URL Removed]

The thing is, much of what you owe is not money that you needed to acquire the home or improve the home, but rather funds used to further your business. If you can flush most of the other debts, then maybe carrying the remainder that's attached to your home may not be such a big deal, if you can negotiate the right terms.

Here's my biggest observation: Most attorneys have very little knowledge about or interest in how to truly work the system in your favor. They're riding the BK wave-and that wave allows even mediocre practitioners to make a fortune. Any time spent on doing anything other than filing BK's is time that's not well-spent for them.

So you and your attorney may have different ideas as to what the best approach is.

[HHM]

1. If the business is defunct, how exactly would you fund a chapter 13 plan? What are your sources of income such that you have a regular source of income that can fund a chapter 13, or for that matter, a workout?

2. Generally, there is no reason for a business entity to file a BK. You simply let the business die a natural death and file a personal BK. After all, if the business is no longer operating, all you should care about is protecting yourself against liability, which can be done in a personal BK.

3. As for workouts, its still an open question about the willingness of lenders to do a workout that would be in your best interest. Since you have received info from loss mitigation, that tells me you have already missed some payments, correct? Thus, going the BK route, the only way to save your home is filing chapter 13, but as I mentioned above, you need a regular source of income to fund that plan. The same is true if you were to attempt a workout, you would need to demonstrate to the lender that you can afford the payments.

Despite all the "news" about lenders supposedly wanting to work things out, the fact that we have a foreclosure crisis is because banks are foreclosing.