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[skipteach]

Hoping for some good advice from people who have been through this:
We are woefully behind on mortgage payments and now will incur foreclosure and attorney costs. Our mortgage payment was $660/mo. but we rolled credit card debt into it (stupid, I know) years ago and it's now $1160/mo. My husband and I both commute 42 miles to work each day, and have two old (but paid for cars). Two children - 14 and 12. When I did the paperwork for Chpt. 13 I dont know how but it shows we should have $400 extra/month. We don't now and that's without paying the mortgage. Owed on house is $123,000 market value of house is about $86,000. We live in SC where you have to pay the difference if they sell the house for less than owed on it. Do we try to do Chpt. 13? or walk away from house and have judgement against us for difference and have to find somewhere else to live? Anyone with advice about this? THanks

[debee]

I would keep fiddling with the Means Test. Try your numbers again here with NOLO's online version just in case you were using any outdated figures, or made a mathematical error.

You can also see the benefit of plugging in various car payment amounts. Fail without, pass with. Buying a new car (or two) would keep you out of a 13 altogether.

[skipteach]

Are they going to want receipts for everything? Child care expenses. Charitable contributions, etc? Someone else mentioned new car payments. I don't know how we would manage that when we can't keep up with everything now. How would that work? What would we do instead of Chpt 13? Thanks!

[debee]

Just because you are over the median doesn't mean you have to file a chapter 13 repayment plan. In fact, unless there are specific reasons why chapter 13 suits your family better, you may be better off filing a chapter 7. In a chapter 7, your debts are discharged without repayment. The trade-off is you need to be able to exempt your assets.

If you want to look at chapter 7, the first step is the Means Test. It has a few parts. If you fail the first part, you move on to the next part and so on. Once you pass it, you can file a chapter 7. If you don't pass it, by adding a car or two, you can change that. The real benefit of adding a car is that you will have reliable transportation going forward. The last thing you want is a major breakdown a week after filing when you have no credit and no cash reserves to pay for the repair.

The next hurdle is your schedules I/J and DMI. If you can get that below $117 (not including debt payments because they will be discharged and you will not be paying them going forward), then you're good for a chapter 7.

If you decide on a chapter 7, it may be better to keep the house until your case is done. Secured debt helps on the Means Test. Your obligation on the loan will be discharged in the 7 and you can walk away afterward without fear of being sued. Also, if you wait until afterward you can remain in the house while it goes through the foreclosure process and live rent-free. Or you can keep it, so long as you keep current on the payments. Some people prefer to move beforehand. I would run the numbers through the means test to compare standard rent expense vs. mortgage (all the way down through the part that calculates the hypothetical ch13 payment) to see which helps you more.

For most people, money for the new car payment comes from not paying the credit cards (or whatever kind of debt you seek to discharge).

My understanding with charitable contributions is that you can claim them so long as you have a history of making them.

As for receipts, I wouldn't claim an expense on the Means Test that you can't document because if it's questioned, you want to be able to prove it.

EDIT: Other expenses that people discover they need to revisit prior to filing bankruptcy are home and car insurance. You want ample coverage, and low deductible. Also, term life insurance on both parents.

[skipteach]

So, in a Chpt. 7 you can keep your home? How would we qualify for car loans with our house in foreclosure? I think our DMI is coming out too high because the standards for sc are low, but we spend more on everything. Like we are allowed $1377 for food, clothes, etc. and we spend about that just on food. With a 14 year old boy and 12 year old girl, they need clothes a lot and new shoes a lot (not to mention eat a lot). They are both in sports and need uniforms, shoes, etc. We spend more on gas then the std. because we both commute 84 miles a day. Thanks for all your advice!!

[momofthree]

You can keep your home in a ch.7 if the payments are current. If you are already in foreclosure, then filing 7 will halt the foreclosure until the bank files for "relief of stay" and then they can continue with the proceedings.

As far as qualifying for an auto loan, so many people are losing their houses these days, it isn't the nail in the coffin that it used to be 5-10 years ago. Auto lenders will still finance you, they know you still need a reliable car even if you had to give up your upside-down home.

The gas expense is probably what is killing you right now. The means test uses an arbitrary number for "transportation expense." You clearly drive more than the average 12,000 miles per year. You will be allowed the actual expense on your schedule J provided you can prove the expense (shouldn't be a problem for you). I know my dh commutes 120 miles per day roundtrip and our gas bill is over $600 a month--and that's in a car that gets 32 mpg.

Things like sports & equipment are not considered a necessary living expense in the context of bk.

[debee]

I agree with momofthree.

Filing chapter 7 won't save your house, but since you are so far underwater and so far from work, are you sure it's in your best interest to keep it?

Also, depending on your district you may still be able to use the mortgage expense on the Means Test (if it's higher than your local rent, this would be to your advantage)even if you're not paying it, or you may want to stop paying on your credit cards in order to make money available for the mortgage if that would be in your best interest.

If I were you, I would be discussing these options with an experienced bankruptcy attorney. Good luck!