The Money Pit

[HakunaMatata]

[Iwantmyname]

even if you sold the house for 55K wouldn't you still owe the rest of the money (ten years is not enough time to realy build up enough equity to spit on). So whether you sell it or not you will owe the money. You might also think of going BK and not re-affirming the house. It would behave financially more like a rental -- look into it (always see a lawyer, I'm just a yahoo on the street).

[justplaintired]

Well sounds to me like your house isn't worth keeping. So that being said, why keep sinking money into a sinking house? So if you let the house go, you will have to pay rent right? Find out what is an acceptable rental price in your area. Then go meet a few attorneys.

For Michigan, for cases filed after March 15, 2009, the median income for a single wage earner is $44,703; for a family of two, it is $53,575; for three, $63,339; and for four, $76,312. Add $6,900 for each individual in excess of 4.

Does this match what you found? Ofcourse even if you are over, after the means test you still may qualify for a 7.

Good luck!

[HakunaMatata]

I definitely would not reaffirm. I want out of this money pit! I haven't really contemplated the notion of selling. To me, this is nearly impossible.

If I go the C7 route, I won't have to worry about the deficiency. My concern is when do I begin this process? If I'm not the perfect bankruptcy candidate now...will the foreclosure bring me to this level? I have not submitted my June mortgage payment and I was informed I can't begin the C7 process for four months. Should I be concerned with this timeline?

[HakunaMatata]

Plaintired-

Those are the exact numbers I've found and my income is currently BELOW the median (by $300). I've even completed the Means Test online and found that I was a suitable C7 candidate (although, the C13 breakdown is seemingly doable). Ahhh...it feels good to not be crazy...thank you! Now...why did the attorney tell me differently? (Hence my desire to discuss options with a different attorney!).

I do have a glitch. My income will increase slightly next month which will put me OVER the median income. (Never thought I'd want to refuse a salary increase!). I was told that I can't file for four months due to credit card use. Any ideas?

[DeadManCrawling]

Attorneys make more money from filing Ch 13 cases than they do from Ch 7. Not all attorneys will push for a ch 13 all the time, but some see it as an easier fight if the debtor is close to or above median.

I would keep shopping attorneys until you find one that has the same goal and vision as you do.

Also, in a quick setting like a consultation, it is easy to overlook expenses or underestimate actual costs, which could have led the attorney to a CH 13 conclusion for you.

In any event, don't sign an attorney until you are sure they are acting in your best interests and have a good grasp of your exact circumstances.

As far as the house, I wouldn't keep it either. I too wrestled with the morality issue--at least until I figured out the opposition (banks, lenders) have no qualms at all about morality and would hound a dying man for his last dollar, even if that dollar were intended to feed his infant children.

Good luck in all ahead of you!

-DMC

[curmudgeon]

We are in the same boat. Just missed our first mortgage payment, but still using one last credit card. Our income is less than half of what it was before my husband lost his aviation job in February. Our house is also a money pit and needs absolutely everything (in some places our wooden fence is propped up with sticks!). We are totally upside down on it with no hope of getting right side up on this "shack". We talked to a realtor about selling when DH first lost his job and her advice was "you'd better pray one of you gets a job because you can never sell this for what you need to get out from under it". Should have stopped making payments then, but were still struggling with it being "wrong" to not pay our bills. Needless to say, not struggling with that issue with quite the same fervor as we were five months ago. We will ride this out as long as we can, quit using the last card in August (get through back-to-school expenses) and then start down the road to bankruptcy.

[LuciluS]

Our BK Attorney told us: We could not pay an unsecured creditor more than $600 in the 90 days before filing BK. It's best to put 60-90 days between charging on any credit cards, but it's not mandatory. As long as the charges were for necessities and do not toal $600 in the 90 days before filing BK, you should be okay.

There are several people who have posted in the Chapter 7 section who have paid for groceries, gas, etc. almost up until their BK as it was the only way they could live. It just means a Creditor Might show up at the 341 hearing and object. Worse case scenario....Trustee would require you to repay the charges.

Also the Trustee would go after the Creditor who you paid more than $600 in the 90 days, not you. However, I wouldn't want to 'be put under the fire, so to speak'. Pay your necessities before anything else.

As for the Attorney who gave you false income amounts for filing Chapter 7, he is behind by about 3 1/2 - 4 mths. as the new Median Income came out some time in March 09. I would get at least 2 other free consults if you can find the time.

We live in a very small town pop. 2,400 and the closest city has only 2 Attorneys. As my hubby is an over the road truck driver and I'm 100% disabled, we knew we needed to find one close. We interviewed the two late last Sept. and picked the Attorney who specializes in Bankruptcy only.

Besides the free consult, I've had one other face-to-face meeting with him. I usually email him questions every two weeks (if I have any) and he gets back to me within 2-3 days. Once he emailed me on a Sat. Using email is less time consuming than phone calls.

Because of some income needing to drop off (did 2/09) we will be filing 9/30/09 using Mar-Aug. Gross Income. We are under our State's Median Income as my disability is not included in the determining factor, but is included in determining your disposable income.

Just because you are over your State's Median Income doesn't mean you cannot file a Chapter 7. However, I believe to file a Chapter 7 you must be current on your mortgage. Thankfully, I've been able to pay our monthly mortgage and Dh's truck payment.

[HakunaMatata]

Wow...all of you are AMAZING! Thank you for your insight and for sharing your personal experiences!

I'm still so confused. I just wish I was a clean candidate for C7. I'm so tired of pondering this! I've always had very austere spending habits and I know I can pull myself out of credit card debt; although, my house issue remains the biggest factor for me. I really need to free myself of this house. While I can afford the payments, I can't afford the numerous upcoming repairs (and we all know a refi isn't a possibility in this lovely market). My CPA described my situation as throwing good money against bad money. He's an advocate of starting anew. While he has offered sound advice, it's still really uncomfortable for me.

DMC-
Your breakdown of creditors is classic. So sad, yet so true! Morality and money just don't mix.

I didn't realize C13 was more profitable for attorneys. Quite honestly, C13 doesn't interest me. I may be missing the big picture; although, repaying my debts (while reduced) AND have my credit plummet isn't very enticing. I have no assets with the exception of a devalued house (is this even as asset?!!). I suppose I've developed a "go big or go home" attitude...I simply need to find a new home! I don't have budgeting issues and I'm definitely not a "spender". I fell on hard times and I've exerted considerable energy toward rectifying my situation for the past two years. Debt has caused mental exhaustion. I'd prefer to redirect my energy into my future.

Curmudgeon-
Gosh, we really are in the same boat. Thankfully, there appear to be many captains here willing to help steer our ship! Like you, I should have made this decision a long time ago. I maintained false hope that living in a highly sought after area would reap reward. Plus, I struggled separating morality from money. I'm stuck in a property I've owned for ten years that's worth less than half of what I owe. Sure, things will change. I simply don't have the money or patience to continue along this path.

Lucilus-
Thank you for the wealth of information pertaining to credit cards! My consult attorney didn't offer nearly as much detail!

I've balance bounced for years at zero percent interest. Thankfully, I haven't transferred a balance within the past six months. I do have one card that I use for everything. I have never carried cash and prior to my financial decline, I treated credit cards as 30 day interest-free loans and I've enjoyed the free perks (cash back, air miles, etc.). This card, in particular, has exceeded $600/month in recent months. I haven't purchased anything akin to luxury items (fuel, groceries, necessities, phone, dry cleaning and I also had $500 in veterinary care). Two months ago, I began paying minimums on credit cards (something I've never done). I grew tired of not having any savings and with the ever-growing economic surprises in the Detroit economy, I wanted to have some savings should anything happen to my employment status. While my spending habits haven't been altered, my payment habits have changed which may be cause for concern. I have continued to earn the same wages and I'm paying less in order to build a nest egg. Is this frowned upon? Obviously, the credit card that was used and paid off monthly has been eliminated from my wallet. I'm now a cash-carrying chica!

My consult attorney's lack of knowledge regarding median income...ugh...who knows?! I questioned him (as I had completed the online Means Test) and asked if the median income had changed recently. He stated that it adjusts some time around April. The information I've found online indicated March. Is it safe to assume this won't change until next March? In light of current economic decline, do you surmise median incomes will dramatically decrease in 2010?

Okay...one last question (my head is spinning!). I have a credit card with my credit union (this was a balance transfer...the card has never been used to purchase goods). The attorney asked "are you going to screw your credit union?". I was taken aback by his word choice and since I didn't really understand the nature of his question, my response was "well, that's not exactly my intention". What could he have been implying? Do some people reaffirm credit card debts? If so, is there a particular reason why this credit union card would warrant such?

Thank you all so much!!

[DeadManCrawling]

Attorney may have been well-intentioned but perhaps did not explain himself very well.

Many people have multiple loans with their credit unions and run serious risk of cross-collateralization. This means that if you have a savings or checking account (or any asset) with the credit union and you owe them money on a credit card, home or any kind of debt, they can immediately deplete your accounts to pay themselves for your other debt. It happens often, and your attorney may have attempted to raise a warning flag.

If this is the case, you would be wise to get a new account at a bank you have no financial obligation to ASAP. Many people recommend a local bank with little or no connections to anything beyond your area or state, to minimize success in asset searches and other legal loopholes that could put your funds at risk.

Detroit, eh? Just saw the other day that the median home price in your area is 6k. Yes, SIX k. What a mess. Hope all goes smooth for you.

[justplaintired]

First are you still speaking with the same attorney? Did this person ask you if you were going to screw the credit union? Please find a different attorney, get a fresh start with someone else.

Second, if you have money to save you will not qualify for a 7. You are showing disposable income, which will put you in a 13. If you have money left even while paying min. on cc, that will be considered disposable. Whether your income in below the median and puts you in a 7, you must not be able to repay anything to your creditors and the money you are saving is money that could go to your creditors. Sorry. You will need to complete the means test and when you do this if your expenses do not basically take all the money you are making, anything left over will qualify you for a 13. Now if you are still charging and that is how you are saving money, you probably will need to consider how much money will it take to live completely totally without a cc. You just might find you don't have money to save right away.

Maybe I misunderstand, and if so I am sorry, but it appears you are saying you are trying to save some money, which you will have to disclose all bank accts. Savings included. I know in Indiana we couldn't have more then $600 in the bank, in any acct, a total of $600 and this is for 2 people. This is for a C7.

[HakunaMatata]

DMC-

Yes, I surmised the attorney was referring to cross-collateralization as I have savings, checking, one credit card, and an auto loan at my credit union. His word choice was a bit odd. Do some people reaffirm credit cards in situations such as this? Should this occur, does one have more credit leverage with a particular finanacial institution post-bk? I honestly wouldn't mind paying off this debt, especially if there are long-term benefits.

Wow, I haven't heard the median house price is 6k in Detroit; although, this doesn't surprise me! I have read articles about people purchasing homes for $100, yes one hundred dollars! I actually reside in a Detroit suburb. My county has commonly ranked in the top five in the country. While home prices have fallen, I've yet to see anything in this area listed for so little.

Plaintired-

I like how you think! I'm definitely seeking different legal counsel. The consult attorney "screwed" himself by asking the "screw the credit union" question!

As mentioned, I'm rather disciplined with my finances. Managing $20k in credit card debt hasn't been easy; although, I've paid over the minimum on interest-free cards for years. I cut this back and have managed to save a bit. Initially, I regarded this as my cushion. Now, I realize I'm simply saving for attorney's fees provided bk is an option. The interest-free terms will be expiring and my debts will become more challenging as a result. Plus, with all the exciting changes to credit cards, many of my limits have been reduced. Oh, the joys. I recently had to assume an auto loan (for the first time in nearly 10 years). It's only $225/month; although, this will have a considerable impact on my monthly budget.

I completed the online Means Test and this has me baffled. Due to my income falling slightly below the median, the test indicates I can file C7. Out of curiousity, I continued the test. It indicates that I have a whopping $39 disposable income monthly. I've paid approximately $500 monthly to credit cards (excluding the card I've used for necessities and previously paid off monthly). Is it possible that the average costs incorporated in the test don't apply to me (ex/ I actually spend less monthly)? I'm going to redo the test to ensure I haven't made any errors.

Okay, the numbers you presented and what I was told by the consult attorney are extreme. I was told I could have $11,200 in savings for ONE person (which seems outrageous as this is half of my credit card debt!). Gosh, I really need to find a new attorney!

[DeadManCrawling]

Remember that payments you currently make to unsecured, such as credit cards, should not be included on your means test, as you will not be making those payments after BK. If you include those, your numbers are skewed in your favor, and the trustee's job is to take that excess income and make you pay it back.

If you have excess income because of those numbers, you need to find a way to pay expense with that money,

[HakunaMatata]

Thanks DMC! I didn't include cc payments (there is a portion at the end of the legalconsumer Means Test where you can enter existing unsecured debt -this appears to be included in order to assess payments to creditors in a C13, not as monthly costs).

I am a bit confused with the Means Test. My average costs vs. Michigan standards differ. I actually pay LESS than all of the standards (mortgage, auto, food/household/clothing expenses, and utilities). I don't know if I should thank my job or be frustrated (my work life leaves me with very little home life...keeping utility costs down and I'm often too tired to eat!). The test I completed on legalconsumer adjusts my mortgage and auto to reflect my actual costs (less than the Michigan standard). It doesn't grant me the opportunity to adjust utilities, auto operating expenses, or food/clothing/household expenses. In situations such as mine, are actual numbers employed (my real costs) or are the standards applied?

Thanks again!

[justplaintired]

http://www.legalconsumer.com/bankruptcy/means-test/state.php?st=MI

Maybe this will help you. I don't really know whether Michigan will allow federal standards or if they will strictly use Michigans.

Indiana we can not use federal. Hopefully this will help you, if you are not already using this site.