Beginning my bankruptcy journey today :(

[ssmdem]

We have our first meeting today with a bankruptcy attorney. I have spent hours on the internet researching info this past week and know enough to be totally confused and scared to death! I really don't know what direction we're going to go - but something has to change NOW!

Here's our current situation - we own two homes, one that we use as a rental. Our home mortgage is $345K (only worth $278K) with a monthly payment of $2800. Our rental mortgage is $189K (only worth $138K) with a monthly payment (1st mort and HELOC) of $1150. We can only get $1000 rent out of it each month, and it is currently rented until February of 2011. And we have credit card bills of $50K that minimum payments are running us about $1000 a month.

My husband was previously making about $5400 a month (gross). Starting this month, his income is going to be going down to $4400 a month (gross).
In October, I lost my job, and have since found some work, but I'm still short $1500 a month. In July, I will be losing another bit of income (teaching), bringing my income down to just $600 a month -- giving us a total of $5000 a month income. We were struggling before the job losses - there's no way in the world we can do this now.

We've looked at so many options this past week that I'm just overwhelmed. As of right now, we are current and not past due on anything. Pulled my FICO score the other day to just see where we were - probably shouldn't have because it depressed me even further - because it's 738 -- which I know is about the plummet rapidly!!

That will all change this month, and we will have no choice but to miss payments. I'm scared to death because I've never been late on a payment in my life. Our credit card accounts are still open, but they've been cut up, and no further charges will be made to them. My last charge was at the beginning of the month for tuition - I'm trying to get my teacher certification, but honestly, job prospects around here aren't great. I know I shouldn't have charged it - but I had no other way to pay it at the time.

I've thought of calling the cards when I miss the next payment and ask about their hardship programs to try to get the interest rates down, but if we are seriously looking at bankruptcy, I don't see the point - plus they will automatically start deducting the payments, and I don't want to be paying on the cards if we really are going to file bankruptcy.

We are borderline on the means test for Chap 7 - but I think we will qualify if we wait a few months for my husband's higher salary to fall out of the six month time frame. But how long can we go without paying our credit cards before they do something?

The house obviously is the bigger concern. I think we would qualify for a modification, which honestly we could afford if approved. But I don't know whether to apply before we file for bankruptcy and wait for who knows how long for them to decided whether or not to approve it and then file for bankruptcy on the credit cards and rental property. Or whether to file for bankruptcy and then apply for a modification after the bankruptcy is discharged. I'm not totally against letting them have the house back, although I am concerned about how long it would take before we could buy another home, as my husband is only 17 years away from retirement, and a 15 year mortgage would be crucial at that point. However, that being said, our current mortgage still have 27 years left on it - so we're not looking good from that point of view for retirement unless we can start paying some major extra payments soon in order to get it paid off. Obviously, until I can find a job and my husband's salary goes back up, that's not going to be happening anytime soon. The chances of me getting a teaching job in the fall of 2010 is slim to none - the next school year, quite possibly. My only other work experience is in banking - which I knew I'm blowing all chances of that out of the water with a bankruptcy on my record and medical transcription, which I am currently doing but only for a small account and making very little money.

I really am just lost and unsure which direction to go. I'm praying for some very clear answers about what we should do. I totally don't trust my own judgment right now, but I'm so tired of lying awake at night worrying and running scenarios over in my mind. I'm tired of not being able to buy necessities - my husband calls to see if it's okay to get an $8 haircut! I'm just tired of living like this and am ready to have some freedom and peace back in my life.

[Mi Bankruptcy]

Your in a good place coming to this forum, you provided some good information. You need to know you have just taken the first step towards your financial freedom. Believe it or not you this may all be a blessing in disguise. I have definitely had to call my wife to ask if I can get a $8.00 haircut so I know where you are coming from.

Have you taken any large cash advances in the past 6 months?

[ssmdem]

No, it's been at least a year probably longer since a cash advance - and those were all balance transfers. My last charges earlier this month for $535 (tuition) and $650 (medical costs) which again, I know I shouldn't have done, but there's no taking it back now. I plan to wait a few months before filing anyway, so hopefully, this won't hurt me.

[Mi Bankruptcy]

OK, you should file then. Make sure you have at least 3 bankruptcy consults and read this forum and ask questions. I can't stress enough the need for 3 consults. Also, pull your credit reports to make sure you are including everything when you are filing. So, if you wipe out your rental and credit card debts would you be able to afford your home at its current monthly payment? Who is servicing your mortgage this will give everyone an idea of what you may face.

You also need to open another bank account. You want to make sure the creditors don't pull any cross collateralization stuff on you. So, if you have a credit card, at the the same place as you bank they can go into your bank and take it.

[ssmdem]

We could pay the mortgage at its current amount but still leaves us VERY little wiggle room. Once our income goes back up, we would probably be okay. But it would still be over the 31% that the modification people look at for quite a while until then, so I think we could qualify for the modification. The question we have to decide is if we want to or just get out, rent for awhile, and then try to find something smaller and more affordable that we could pay off quickly. Oh - the mortgage is through Chase.

We have no loans at our current bank. Do we still need to find another bank account?

[NewPage]

No advice, I just wanted to give you virtual hugs. March was the first time I have ever missed any payments (well, since my young irresponsible years that is) and it is scary. But you'll be okay.

[ssmdem]

No advice, I just wanted to give you virtual hugs. March was the first time I have ever missed any payments (well, since my young irresponsible years that is) and it is scary. But you'll be okay.

Thank you! I do appreciate it! I think that's the hardest step for me because it means the decision has been made and there's no looking back. Any idea how long I can miss my credit card payments without them doing something - other than the phone calls? How about my mortages?

[frogger]

Welcome. You'll do just fine.

[SMinGA]

If you are at (or soon will be) $5000 GROSS income, then trying to keep a $2800 mortgage payment seems like an impossible task. Giving up the home would be hard to do I imagine, but being tied to it (in the hopes of a modification) seems like sabotage to your 'new start'.

[ssmdem]

Also, my rental. I'm having a hard time with this one emotionally. We just rented it in February to a lady and her son whose husband had walked out on them. He stopped paying the mortgage, and at the time she approached us, it was three months behind and she just wanted to get out of the house and avoid the ugliness of the foreclosure. She has no income and most likely would get a good alimony check. I have no idea what they became, but her dad cosigned on the lease - and we've had no issues at all with her paying the rent. She spent lots of time crying on my shoulder and it's killing me to think I may have to tell them they're going to have to start over AGAIN! She's paying $1000, which is really more than she can afford and if I'm honest, more than the rent is worth considering she could get so much more house for just $100-$200 more a month. The first mortgage is $800, the HELOC is $350. Obviously, we're losing money every month, but it's better than it sitting not rented at all. What do I do?? Tell her what's going on and just let her stay rent free if she wants and quit making payments?? Take the $1000 and pay the 1st mortgage and the remaining on the creditline - leaving it short $150 every month?? I can't in all good faith, as bad as we need the money, take her rent check and not make the house payment with it.

[ssmdem]

If you are at (or soon will be) $5000 GROSS income, then trying to keep a $2800 mortgage payment seems like an impossible task. Giving up the home would be hard to do I imagine, but being tied to it (in the hopes of a modification) seems like sabotage to your 'new start'.

I agree - it is impossible without a modification. I guess that's why I wonder if I shouldn't try the modification first before filing and taking the "in hopes of" part out of the equation. But, I don't know how long I can go without paying those credit card payments, which I know we're going to have to file to get rid of without them taking some kind of action. If I thought I could just miss them and make the trial mort payments while they made a decision without worrying about the credit card companies making a move, I'd do that. Just unsure what kind of timeframe we're looking at. One is through Citibank, the other through Chase.

[Mi Bankruptcy]

Also, my rental. I'm having a hard time with this one emotionally. We just rented it in February to a lady and her son whose husband had walked out on them. He stopped paying the mortgage, and at the time she approached us, it was three months behind and she just wanted to get out of the house and avoid the ugliness of the foreclosure. She has no income and most likely would get a good alimony check. I have no idea what they became, but her dad cosigned on the lease - and we've had no issues at all with her paying the rent. She spent lots of time crying on my shoulder and it's killing me to think I may have to tell them they're going to have to start over AGAIN! She's paying $1000, which is really more than she can afford and if I'm honest, more than the rent is worth considering she could get so much more house for just $100-$200 more a month. The first mortgage is $800, the HELOC is $350. Obviously, we're losing money every month, but it's better than it sitting not rented at all. What do I do?? Tell her what's going on and just let her stay rent free if she wants and quit making payments?? Take the $1000 and pay the 1st mortgage and the remaining on the creditline - leaving it short $150 every month?? I can't in all good faith, as bad as we need the money, take her rent check and not make the house payment with it.

Well. As soon as you decide to let it go you will stop making payments on the mortgage. You can tell her to stop paying you and she can live there for free until she is evicted. This would be nice for her to save up cash since it takes awhile to foreclose on the houses. I also would not count on a modification. People have had tough times getting modifications.

[NewPage]

Thank you! I do appreciate it! I think that's the hardest step for me because it means the decision has been made and there's no looking back. Any idea how long I can miss my credit card payments without them doing something - other than the phone calls? How about my mortages?

Well, for me the calls started pretty quickly. Daily. A piece of advice I received here was to get a separate phone line for them. I did that (switched my contact number for the cards to an existing pay-as-you-go phone we already have for my son to use on occasion), but they didn't seem to catch on. Just yesterday I logged into AMEX to look at stuff and it said "we haven't been able to contact you, please update your info". So I bit the bullet and called the number, and the rep said they didn't have that number -- even though it's what showed on my screen. *shrug* So she changed it for me and we talked about the payment plan they could offer (which stunk LOL). They haven't called yet today, and I don't know if that's b/c I talked to someone yesterday or what.

My Dad went through a long period of unemployment last year, and for him the phone rang *incessantly*. He did not BK (got a good-paying job at last) but until he settled with the card companies, they hounded him all the time.

I don't have any mortgage advice though, as we are staying in our house - payment is only $543/month, and the HELOC $165. We could not rent anything that cheaply.

Hang in there!!

[ssmdem]

Well, my meeting went well. I really like this attorney. He answered all my questions and was very upfront about everything. Talked about our options. This is the 2nd attorney we've talked to - the first one I walked away more lost and confused than ever, which is what prompted me to get on the internet and start doing the research. Maybe I got better vibes from this guy because I actually knew what I was talking about now, but he really was a lot more pleasant - the other guy just seemed too arrogant and non-chalant for me.

I asked about purchasing another car now before filing as I had seen recommended. He said that the trustee actually pulled him aside the other day and told him that this is starting to be looked on, and he suggested that I not do it. I told him my concern was the interest rates after bankruptcy and that my 1995 and 2001 model cars just aren't going to last much longer. We were planning to trade them both in on ONE newer model. After looking up the values, he suggested just trading in the 1995 model and getting the new car, then selling the 2001 model after bankruptcy and just applying it towards the loan. He said the trustees around here are basically starting to look at it as hiding assets, so he just didn't suggest going down that road.

We also have a motorcycle that we were currently trying to sell, and he said to definitely wait on that as well. The first attorney never even discussed stuff like this - just kinda shrugged his shoulders. This is why I just feel more comfortable with this guy.

So, long story short - our two options are, after going over a ton of options - if we plan on keeping our home, we could file now as we would fit into a Chap 7 if keeping our home. If we plan to let it go, then we need to wait until late summer when our income level has dropped sufficiently to fit us into the Chap 7. He said as soon as we decide we're filing - no matter when - stop paying the bills.

ONE QUESTION I FORGOT TO ASK THOUGH -- if we decide to keep the home, I'm guessing we should keep paying that one though, huh? I mean, we can't miss those payments while we're in bankruptcy and then catch up after it is discharged - those would need to remain current, right?

He did say, as some others of you have, not to bank on the modification. If we can't make the payment post bankruptcy at the amount it is now, then we need to let the house go. He's not seeing alot of people having luck with the modification - although I do have one friend who was approved with no problems - but again, just not to count on it.

So, running numbers - IF our income stays at the amount it's about to drop to, no way in this world we can make the mortgage payment even without the credit card and rental mortgage payments. If I can find another job shortly making what I was making before, we could do it. NOW, mind you, we'd have a good bit left over each month, but not a bunch. We'd definitely have to save and scrimp for vacations or other "luxuries."

We had stopped my husband's 401K deduction until we could get in a better spot, and we really need to get that started back up again. My daughter will be driving in three years, and she's going to need some kind of transportation. The kids' college funds are set though. And there's always that 27 more years of mortgage payments that we somehow need to knock off the last 10 years early so that my husband can retire when he's supposed to. I know this sounds morbid - but we're both only children, and when our parents pass away, we would get everything - not happening in the foreseeable future, thank God - but this could easily knock off the last 10 years of the mortgage payment though.

In my heart, I really want to keep the house. I designed it myself. We built it ourselves - it's just us to a tee -- unfortunately, the bottom fell out of the housing market! That's the emotional side of me talking though. Rationally, I know this is crazy - let it go, move on, find a rental and save up some bucks for a few years. Then find something affordable, do a 15 year mortgage, and be done with it. There's just so much about it that we'll miss - I love the neighborhood - I love my neighbors (pride is definitely playing a factor) - and we couldn't ask for a better location.

UGH! So much to think about.

[ssmdem]

OH YEH!! Something else I forgot to ask. My husband gets paid (separate check from his paycheck) about $500 in expenses each month. I didn't put this on our form as I've never counted it as income - it's expense reimbursement - mostly mileage, but also cell phone bill and postage used for company, etc. Is this something that should have been counted though?