Foreclosure and Best Type of Bankruptcy

[GAJ]

I just went through a lengthy divorce and couldn't list the home to sell before it was settled. Just finalized the divorce and now my bank tells me they won't accept any more payments (have been making partial payments with what I could afford). My home is upside down about $150,000 according to the tax records and the 1st and 2nd mortgage are held by the same company. I've been under employed but was just hired and start in two days though it is a commission only job. I should be able to start making the full payment accept next month but the mortgage company won't accept. I'm applying for the HAMP program to modify my loan but the bank says they can't stop the process if I am not approved in time so I want to see about a backup plan which would be filing BK. My questions are:

- What is the best type of BK to file if I want to keep my home (I'm in GA if that matters)?
- I've heard the 2nd mortgage can be wiped, is this true?
- I have substantial CC debt as well as other business debt I personally guaranteed, would this get wiped or do I have to work it out too?

Thanks in advance!

[LadyInTheRed]

Welcome to BKforum!

You could file a Chap 7 and save your home if you can have the mortgage caught up before the automatic stay is lifted. I'm guessing that isn't likely.

If you can't bring the mortgage current rather quickly after filing, you could file a Chap 13 to allow you to pay the mortgage arrears over the 36 to 60 month plan.

In a Chap 13, you can strip the 2nd mortgage if it is completely unsecured. The value of the home must be equal to or less than the balance on the first mortgage (including accrued interest and penalties). If it is worth even one cent more than the balance of the first mortgage, the 2nd cannot be stripped.

Your cc debt and the personal liability for the guaranteed business debt would be discharged in a BK. If the business is a separate entity from yourself, the entity would still be liable to pay the debt.

A Chapter 13 can be difficult for somebody who works on commission. You will need to be able to make your monthly plan payments even in months when your commissions are low. Proposing a plan before you have been on the job for a while will be difficult because you do not know what your income will be.

A mortgage is not discharged in a Chap 13. So, if after the BK you find you can't afford the mortgage, the bank can still go after you for a deficiency if allowed in your state.

You really should consider walking away from the house unless renting would be more expensive and/or you can strip the 2nd and bring the amount you owe much closer to the value of the house.