Forks in the road, don't know which direction

[lckybch]

Hi, I'm new here. I've been reading as much as possible the past few days and am having difficulty ferreting out the answers I am hoping to find. We do have an atty so we have counsel as well. I'll try to provide as much info as possible in the hopes someone can help

1st mortgage: $330K - currently 4 mos in arrears, have received notice of sale to occur in December
2nd mortgage (HELOC): $83K

Unsecured debt: approx $70K
Other secured debt (boat & RV loan): $18K
Auto loan rolled into one loan now w/CC: $25K

Husband discharged from active duty April 1st. Was unemployed off and on until starting federal employment mid July. I was unemployed from Feb to beginning of March and now unemployed again from mid July to ?? I was advised to take a medical leave of absence by my physician, my employer could not hold my position and I hadn't been there long enough for FMLA protection. At this point, the medical problems remain and I probably will apply for at least short term disability and have no idea when/if I can return to being employed.

Husband is classed as an 80% disabled vet, receives approx $1800/mo compensation. Also receives retirement pay of approx $1300/mo. Makes approx $2850 GROSS per mo at new job but we have only yet seen one paycheck and it wasn't for the full pay period.

We have a household of 7, soon to be 8, which would include our oldest child (20) who is going to be a full time student and is a Nat'l Guard member, also works full time, as well as our nephew who will be discharged from Active Duty due to diabetes and coming to live with us while he goes to school and gets back on his feet.

We live in Idaho, where according to our state exemptions, his veteran's disability and my potential short term disability are exempt. Atty says we have to include them as income.

Due to husband's disability status, we do not have to pass the means test and even when entering in the information in the calculator, we still don't pass it so we are below the median and could file a Ch 7.

Atty advises we go the route of a Ch 13 as it would strip the HELOC assuming house appraises at less than 1st, which it should. Also would do cramdown of auto and might potentially allow us to keep the boat/RV (which I'm not sure I see happening under any circumstance but husband would really like it if we could). Atty says we can do Ch 7 if we wish but unless we can cure the mortgage arrears on our own, and we don't want to give up the house, then a 13 is really our only option.

I am actually fine with doing a 13, because in the long run we end up with the HELOC stripped, all the unsecured eventually discharged, and will own the auto outright at the end. We would be *completely* debt free in 3-5 yrs.

I am worried and sleepless at night that for some reason a judge would refuse us a 13 because our DMI according to the calculator is negative $1K or something and we could pay negative $62K over a plan. If forced to do a 7, then we may lose the house.

If the disability is exempt, can we still request it be used to repay? With husband's total income alone we will make approx $5500/mo. Now that we have a sale date, would the atty for the lender or the lender be willing to work with us at all?? Do you think that the boat and RV are definitely going to have to go regardless of which route we go? And again, that is not the biggest concern, but my husband is feeling loss all around him and I think that is the one thing he is choosing to hang his hat on while I handle everything else, kwim? Would it be worthwhile to file a 13 and then convert to a 7 later or file a 7 and then a 13 to save the house?

I appreciate any and all advice that can be given!

[nc73]

I'd go for a 7. So what if you lose the house? Rent until you can afford a house.

[keepmine]

You can use disability income to fund a Chapter 13.

I'd agree with the previous poster. Take a bath in the soothing waters of a Chapter 7 and ditch a huge debt load. Even with a lein strip on the mortgage, you just don't have the income to support a family of 8 and be responsible for a large mortgage plus, the arrearage.

[hereforinfo]

I agree with the others. Even if you could get rid of the $70k unsecured debt, you still don't have the income to afford a $350k+ mortgage, let alone a boat and an RV. It's all just stuff, and more debt. Go for a fresh start and you can buy that stuff again someday when you save the cash.

Besides, I can't see how you could have enough disposable income for payments on luxury items like a boat and RV, when that money could be used to pay off your unsecured creditors.

Regardless, I'm sorry for your situation and I think it's pretty sad that a disabled vet is paid so little after serving our country.

[lckybch]

I'd go for a 7. So what if you lose the house? Rent until you can afford a house.

You can use disability income to fund a Chapter 13.

I'd agree with the previous poster. Take a bath in the soothing waters of a Chapter 7 and ditch a huge debt load. Even with a lein strip on the mortgage, you just don't have the income to support a family of 8 and be responsible for a large mortgage plus, the arrearage.

Well, my mortgage payment is $1678/mo @ 4.25%. In our area, to find a house large enough to house all of us would cost very close to, or more than, my payment. I think our payment is putting us sitting right at or very close to the recommended debt to income ratio, and its pretty close to the allowance our state gives on the means test. This is just one of the reasons we are reluctant to let the house go. We *can* afford it, just not while we've been sitting behind the 8 ball.

I mentioned the 2 oldest "kids" because while they are/will be living in my household, they aren't really costing me much. They eat here rarely, have their own incomes but aren't required to pay rent or utilities, work and go to school. Other than sleep/laundry/showers, they don't significantly impact our finances. So I included them as household members but should I have?

The atty said that with the lien strip we would, over the lifetime of the BK, end up coming out ahead, so to speak.

[lckybch]

I agree with the others. Even if you could get rid of the $70k unsecured debt, you still don't have the income to afford a $350k+ mortgage, let alone a boat and an RV. It's all just stuff, and more debt. Go for a fresh start and you can buy that stuff again someday when you save the cash.

Besides, I can't see how you could have enough disposable income for payments on luxury items like a boat and RV, when that money could be used to pay off your unsecured creditors.

Regardless, I'm sorry for your situation and I think it's pretty sad that a disabled vet is paid so little after serving our country.

You posted while I was replying above, where I show what our mortgage payment is. The boat and RV payments combined are $285/mo, insurance on all our "vehicles", including our 3 cars, is approx $100/mo. We own 2 of the vehicles, have loan on only 1.

If our income is $5500/mo and those 3 payments plus the vehicle payment come up to about $2500/mo, how can we *not* afford a Ch 13 which enables us to keep the house?

I promise I'm not trying to be obstinate, I just need to research it to death

[jadams]

Is the house valued under the first? If so, by about how much? How does your mortgage payment compare to rental prices in your area (i.e. even if underwater is the mortgage cheaper than a rental)?

So the auto loan balance was transferred to a CC? Is the title clear on the car? Do you have enough exemptions to keep the car? And how long ago did the payoff/refi transaction take place?

It makes it harder to keep the car if it has a clear title (more equity, so you need more exemptions)... but it's at least theoretically possible this way you could get to keep the car and not have to continue payments (provided everything happened in such a manner that the CC company doesn't object and you have sufficient exemptions).

[lckybch]

Is the house valued under the first? If so, by about how much? How does your mortgage payment compare to rental prices in your area (i.e. even if underwater is the mortgage cheaper than a rental)?

So the auto loan balance was transferred to a CC? Is the title clear on the car? Do you have enough exemptions to keep the car? And how long ago did the payoff/refi transaction take place?

It makes it harder to keep the car if it has a clear title (more equity, so you need more exemptions)... but it's at least theoretically possible this way you could get to keep the car and not have to continue payments (provided everything happened in such a manner that the CC company doesn't object and you have sufficient exemptions).

The house is most likely valued less than the first. As in a lot of places, real estate has tanked here. The atty recommended getting an appraisal to determine for sure. See above on mortgage vs rental but yes, our mortgage is about the same as a rental would be.

The auto loan is through a credit union that I also have a credit card with. They combined the two payments recently to help me out but the car is way upside down. We do have 2 other vehicles, one of which has a salvage title and very little to no equity. Not sure about my husband's truck, its an older model Ford F-150.

[jadams]

The auto loan is through a credit union that I also have a credit card with. They combined the two payments recently to help me out but the car is way upside down.

Oh, ok. No worries then.

I misunderstood and thought you had written a balance transfer check or something like that and "paid-off" the car loan with a lower rate on your credit card.

[hereforinfo]

Well, my mortgage payment is $1678/mo @ 4.25%. In our area, to find a house large enough to house all of us would cost very close to, or more than, my payment. I think our payment is putting us sitting right at or very close to the recommended debt to income ratio, and its pretty close to the allowance our state gives on the means test. This is just one of the reasons we are reluctant to let the house go. We *can* afford it, just not while we've been sitting behind the 8 ball.

Ok, that makes more sense. But obviously that payment/interest isn't fixed right? Is that interest only? Does it include taxes and insurance? When will the payment go up? Just trying to figure out if the payment is going to go up anytime soon and if so, is it going to put you right back in default?

Also, if your cars are that old it's reasonable to expect you may need to purchase/finance a newer car or two in the next few years. I would take that into consideration (as well as a potential mortgage increase) when figuring out a budget and what you can reasonably afford (i.e., $285/month for boat and rv).

[lckybch]

Ok, that makes more sense. But obviously that payment/interest isn't fixed right? Is that interest only? Does it include taxes and insurance? When will the payment go up? Just trying to figure out if the payment is going to go up anytime soon and if so, is it going to put you right back in default?

Also, if your cars are that old it's reasonable to expect you may need to purchase/finance a newer car or two in the next few years. I would take that into consideration (as well as a potential mortgage increase) when figuring out a budget and what you can reasonably afford (i.e., $285/month for boat and rv).

Yes, it is a fixed rate, so my payment remains the same for the life of the loan, allowing adjustments for escrow and such. It does include taxes and insurance.

My car, the one with the loan, is a 2005 Ford Freestar minivan with approx 47K miles on it. Should his truck take a dump, then we would still have the van as a backup. While I'm not working this is doable, although I do need to transport children and be able to make medical appts.

The salvage title vehicle is what our oldest daughter has been driving for 3 yrs. Its in our name because there wasn't really a reason for it not to be, but she would like to sell it and buy a newer vehicle. I'd transfer it to her right now if it wouldn't look fraudulent

[jadams]

Can you catch up on the mortgage if you stop paying the other debts that will be discharged?

It's possible that could allow you to do a 7 and then strip the second's lien in a 13.

Can I Strip My Second Lien After Filing Chapter 7

I guess it would depend on what, if anything, your estimated CH 13 payment would include to the unsecured claims if you didn't get a CH 7 discharge first.

[lckybch]

Can you catch up on the mortgage if you stop paying the other debts that will be discharged?

It's possible that could allow you to do a 7 and then strip the second's lien in a 13.

Can I Strip My Second Lien After Filing Chapter 7

I guess it would depend on what, if anything, your estimated CH 13 payment would include to the unsecured claims if you didn't get a CH 7 discharge first.

If they've already scheduled the sale by auction, do I still have this option? Because, yes, the amount that is owed we could make up by the date of the scheduled sale as well as make current payments. I'm under the impression that this is no longer available to us now?