Question Decisions, Decisions...I need help.

[PyroGuy]

Spoke with 2 different atty's today...got 2 different courses of action!


First atty says do ch. 7, get rid of cc debt and IRS bill from over 3 years ago...but keep home with HELOC and 3rd mortgage. Keeping those really dosn't help us too much since the HELOC and 3rd are totalled about $1,000 each month.

I can get a certified appraisal that can show our home is worth about $145,000 on a $148,500 1st mortgage.....Is that too "close" to each other that might make the courts get another appraisal?

The only thing that the 2nd atty was worried about was the "Closeness" of the 1st and value. He felt we could do a 13, but if the courts objected, we would change to a ch.7.

Any of you had a similar situation? If I go 13 now, I will stop paying the heloc and 3rd....but what happens to the payments in arrears on those if we have to switch to a 7??

Here comes a sleepless night....one of many, I guess!

Thanks in advance!

[Mensa1]

You are fortunate that you have a choice between the Ch 7 and 13, most ppl aren't so lucky due to means testing. So you will simply need to decide which approach yields the most benefit, 13 and stripping the HELOC's or 7 and wipe out the unsecured but lkeave the HELOC's?

The appraisal albeit close, should work if that number holds up to scrutiny. The appraisal just needs to be equal to or less than the first mtg.

To answer your question about the pymts if you convert to a ch 7 is, those poymts would be in arrears and in default. What you might consider if you are forced to go the route of ch 7, is to leave the HELOC and 3rd mtg in default and not pay either one of them. The obligation to pay those notes will be wiped out in the Ch 7 Bk... but the lien will remain on the property. At some point down the road you will likely have an oppty to settle these for less and then you can discharge the HELOC and 3rd mtg for less than what is owed. This is a fine line to walk and not w/o risk of either one of the jr mtgs of foreclosing on your home, but doubtful since there is no equity for them to get if they foreclose. Once they are discharged the only place for them to look for repayment is the property and if it is underwater, however slight, they will tip-toe before rushing into legal action to foreclose.

Suggest you educate yourself more on this point and you can search this site for similar posts of Jr mtgs in default and read other posts on the subject.

[LadyInTheRed]

I also have a choice between 7 & 13. Perhaps my reasoning for deciding on a 13 will give you some things to think about.

The 13 is going to be tough, but I think it will be worth it to strip the 2nd mortgage. If I find out I can't make it through the 13, I know I can convert to 7 and try to negotiate a settlement on the 2nd. My mortgage is so underwater that it will probably be a long time before the house it is worth enough to make foreclosure worth while. That should give me some leverage to negotiate and some time if I can't settle. Another factor in my decision is that renting a comparable home will cost as much as my first mortgage. So, if I have to walk away eventually, I will have lost nothing except liability for the deficiency on the second.

[Mensa1]

So, if I have to walk away eventually, I will have lost nothing except liability for the deficiency on the second.

Lady, you didn't mention whether you planned on reaffirming your 1st mtg note? If not then walking away can be done with no issues, but since you mentioned that you are escaping def on the 2nd, (your state must allow def judg's), hopefully you won't be running the risk of a def with the 1st mtg. Reaffirming any mtg (1st or 2nd) has little value, IMO.

[LadyInTheRed]

Lady, you didn't mention whether you planned on reaffirming your 1st mtg note? If not then walking away can be done with no issues, but since you mentioned that you are escaping def on the 2nd, (your state must allow def judg's), hopefully you won't be running the risk of a def with the 1st mtg. Reaffirming any mtg (1st or 2nd) has little value, IMO.

Thanks for the heads up. I have no plans to reaffirm. My state will not allow a def judg on the 1st because it is a purchase money loan. I refied the 2nd to a fixed rate and rolled in cc debt. So, it is not a purchase money loan and is subject to def judg. Didn't know that at the time, but with the HELOC rate at 9.7% and climbing monthly, I probably would have refied to 6.5% even if I knew the consequences.