defaulting after filing bankrupcy

[im42nut]

My husband and I filed Chapter 13 and are making payments every month for five years. We are in AZ and after 5 years our $70000 second mortgage will be clipped since we kept our house. Now my husband thinks we can just quit paying our first mortgage which is $2400 per month but I think this will cause default. Guess I should contact our attorney. I am afraid creditors will try to garnish my wages and future pension if I did this. Has anyone done anything like this. His friends say we could let the house go to foreclosure - but this would be defaulting on our bankrupcy. I am sooooo frustrated. It is very hard to make these payments but I do not know which direction to go. Any advice??

Frustrated in Arizona

[despritfreya]

CALL YOUR ATTNY in the morning.

If you have decided to walk away from the home then your attny needs to modify or amend your Plan to show the surrender of the property - maybe even convert the case to a Chapter 7 if you otherwise qualify. If you still want to keep the home you must pay the 1st mortgage regardless of the strip of the 2nd. If you fail to pay the 1st, the lender will have its attny file a Motion for Relief From the Automatic Stay. If you do not bring payments current and/or enter into a Stipulation to cure the post petition default the Judge will grant the motion and the lender will begin or resume the foreclosure process.

Des.

[bcohen]

Are you planning to keep the house?

[im42nut]

Not if we can get out of it. The problem is I believe if we do not pay the mortgage then the second mortgage won't be clipped. My husband would like to see if we can pay off this bankrupcy perhaps by cashing in my stock plan for retirement, then let the house go to foreclosure and save the huge mortgage payment we are making each month. i guess I will have to talk to my lawyer after holidays. Have you heard of anything possible like this. It is sooooo tight to make these Chapter 13 payments and also our mortgage - we can barely make it.

[despritfreya]

The problem is I believe if we do not pay the mortgage then the second mortgage won't be clipped. My husband would like to see if we can pay off this bankrupcy perhaps by cashing in my stock plan for retirement, then let the house go to foreclosure and save the huge mortgage payment we are making each month. i guess I will have to talk to my lawyer after holidays. Have you heard of anything possible like this. It is sooooo tight to make these Chapter 13 payments and also our mortgage - we can barely make it.

You are not making sense. If you are surrendering the house why would you care if the 2nd was "stripped"? You surrender the property to both lien holders and, if the 2nd was not part of the purchase of the home, that creditor will have a general unsecured claim once the 1st forecloses. Any claim by the 2nd, pre or post foreclosure, will eventually be discharged.

If you are surrendering why are you staying in a 13? Do you have too much income for a 7? Do you have non-exempt assets you are trying to protect? Do you have a vehicle or taxes you are trying to pay through the Plan? Have you filed a Chapter 7 within the last 8 years and received a discharge? If none of these questions apply, discuss a conversion with your attorney.

Des.

[im42nut]

defaulting after filing bankrupcy

Thanks for the responses. Des, we were trying to keep the house and filed Chapt 13 because our income is too high I believe for Chapt 7. I feel like the $2000 interest we are paying each month is tax deductible and if we go rent somewhere then taxes will go up anyway. So question is, is it worth it to let this house go??? My husband is bugging me and thinks we can save a lot of money if we let it go, but I don't know, and to even get anywhere decent with this stuff on our credit, who knows?? It is so overwhelming.

I am going to contact the attorney after the holidays and see what he thinks. I thought if you gave up the house, the second mortgage could come after you. I want to retire in 3 years and want this debt gone and not have creditors garnishing my pension.

Any tips???

Another problem is if we don't have this mortgage payment, then won't they just make us pay more to the trustee each month?? So what good would that do??

Can you pay off the amount we owe for 5 years if his parents pay it or I cash out my retirement fund?

[despritfreya]

we were trying to keep the house and filed Chapt 13 because our income is too high I believe for Chapt 7. So question is, is it worth it to let this house go??? My husband is bugging me and thinks we can save a lot of money if we let it go. . .
I thought if you gave up the house, the second mortgage could come after you. . .Another problem is if we don't have this mortgage payment, then won't they just make us pay more to the trustee each month. . .?

Ok, so you do not qualify for the 7 because your income is too high. Your husband wants to surrender the home because he believes you can live more cheaply. You are not sure a surrender makes sense because you believe your Plan payments will increase due to lower expenses.

If you surrender the home and move to less expensive digs and your income has not decreased then, theoretically your revised budget will show an ability to make a higher Plan payment. On the other hand, if your income has decreased it could be a wash. As a result, the decision to walk from the house probably should to depend upon the cost of rentals in your area.

As it relates to the 2nd - it does not matter. If you strip off the 2nd it has an unsecured claim. If you surrender it has an unsecured claim. In either case the debt will be discharged upon the completion of the Plan so the lender will not be going after you for anything if you get a discharge.

Can you pay off the amount we owe for 5 years if his parents pay it or I cash out my retirement fund?

Since you are above median income you are most likely stuck in a 5 year bk therefore you do not want a family member to step in to "pay off" the bk as the only way to get out before 5 years is to pay all allowed claims.

Hope this helps.

Des.