TWO QUESTIONS: School and Foreclosure

[cin]

First off, I just want to thank everyone here who have been so kind to respond in the past.

I am in Massachusetts, and here are my two questions:

1. Once I stop paying my mortgage, what do you think is the approximate amount of months that would go by before I actually have
to claim bankruptcy? (Sovereign Bank, if it makes any difference).

2. If I haven't claimed bankruptcy yet, I want to take out exactly the amount of tuition I will need for school from my 401K. (I will still
have over 100K left, and school is my ONLY real way of assuring future income. It's a 10 month program).


2A -- If I "AM" in bankruptcy, would taking money from my 401K for school NOT be allowed? I have a ways to go to figure this out. Tuition
won't be due until mid-July of next year ........ If I took it out of my 401K in July and claimed bankruptcy he next month, would that
be a problem??

[helpmeout]

I would not touch your 401K until after your BK is closed. The Trustee may go after any recent withdrawels.

[HHM]

Don't touch the 401(k) until AFTER the BK. If you will be "starting" school prior to filing BK, only withdraw the amount needed to actually "pay" the amount the school requires. (e.g. 1 semester).

Also, you don't need to wait until you miss a payment or a foreclosure begins to file BK. No reason in delaying the inevitable. File now (unless there is some other reason).

As for MA foreclosure, each state is a little different, so I don't know off hand, how long foreclosure takes in MA. MA appears to be a typical non-judicial state, so yo are probably looking at 9-12 months from your first missed payment before you would have to be OUT of the house.

[kawh]

I wonder if you would be able to get a tuition deferment or extension of some kind, to still be able to enroll and yet avoid withdrawing all of the 401k money until the following tax year, when you will be in school most of it and will take less of a tax hit on the withdrawal? I know you can avoid the penalties because it's for school, but you will be looking at a tax bill, depending on your other income next year. If you are intent on using the 401k, you could still try to work the timing to your advantage.

I'm also a little concerned you could be thinking you will have to file, but it seems you might have very little debt other than the mortgage?

[cin]

Yes kawh I don't have much debt ... I owe 175 on condo (its worth 105K), my car is paid for, but it's 12 years old (2002 Saturn SC), and about 6,300 visa bill. That's it. The job loss was a shock, but it might be my way out from under a -70K mortgage ... AND I can change direction on how I make a living.

Again, I am STUCK with this thing about ho to afford the 15K I need for school. It's ideally located five minutes from my condo, which is perfect, considering how old my car is. I just can't figure out the TIMING on everything ... If I need the 15K in mid-July, I need to figure out WHEN to stop paying the mortgage ... I

did talk to a bk lawyer in early June, and he suggested filing a Chapter 13, then converting to a 7. A lot also depends on if the lawyer can get anything from my **** employer ....

I HATE not having control over this! It depends on the employment lawyer .. it depends on if my ex-employer will settle with me, it depends on the bk laws ... UGH!!!

Anyways I CLEARLY have to get out from under this mortgage ... To be underwater by 70K and now unemployed ... well it's crazy. I'm 53 and even if I worked until I was 70, I'd probably still be underwater. I could buy the identical condo next door for 105 TODAY .

[cin]

PS -- The school is a community college, the program is Licensed Practical Nurse (several of my friends are nurses), and I am looking into trying to get some funding through unemployment -- Currently in Massachusetts there are no more funds for training, but that could change .....

[btbeme]

A lot also depends on if the lawyer can get anything from my **** employer .... I HATE not having control over this! It depends on the employment lawyer .. it depends on if my ex-employer will settle with me, it depends on the bk laws ... UGH!!!

That's why they call it "practicing law." No guaranteed outcome.

I gotta toss this out there... Have you explored refi or loan modification options for your condo? Federal programs won't really consider you to be "at risk " until you have missed two or three payments - payments that could go toward school, Visa card, etc. I'm just saying that BK will follow you for 10 years, whereas late payments, a short sale, or even a foreclosure all have lesser and shorter term consequences.

Let's say it takes a year to kick you out (you miss payments, apply for modifications, etc - essentially play the delay game) or close a short sale. Would those saved mortgage payments be enough to retire your credit card debt?

Explore your options. See if it makes sense to do what you can to live "mortgage free" for as long as you can in your current place while paying off Visa. Should you get booted out via foreclosure or via short sale, there is a definite timeline that you can stretch before anything happens, and 9-12 months is a pretty good estimate. Get creative and see if that might work. And if it does not, then the BK option isn't going away anytime soon.

DON'T TOUCH your 401(k) unless it is life or death. And then, keep receipts.

[kawh]

I really like your answer, btbeme. Becoming underwater on a mortgage should not be an automatic log flume ride to bk, when cin owes so little other debt.

Also, the 401k she has may have a rule like mine did, that you can't take out or rollover just part of it, it has to be all or nothing. Sometimes the funds you have in a 401k won't all transfer to the new custodian. Then they have to liquidate some of your holdings and you wind up with cash instead. This may not be the best market timing for that to happen, with cash earning so little and equities down. Just depends on what the 401k currently holds for investments.

[cin]

Thanks btbeme and kawh. I have had my 401K for 30 years, am fully invested, and bk can't touch it (it's mostly in TIAA-Cref). If I use it for school, I don't have tyo pay the 10% penalty tax. So .. I have to get through to July, pay the 15K tuition from my 401K, and THEN file for bk ... I think it's all about timing here. My unemployment will start in late October (there was a delay because I got severance) and it's enough to pay for my mortgage and health care ... I am in a bind unless my ex-employer settles with my lawyer for a little more money to tide me over longer. So with tuition due in July, how do I put off filing until then .. that's my dilema. Although I understand taking money for a 401K is a BAD idea usually, I HAVE to learn and new trade -- I have to STRESS that otherwise I will be competing with 25 year olds with college degrees who don't need benefits and that makes me realize I am utterly screwed for the next 15 years. This is my ONLY chance to turn this around -- I will be collecting unemployment, had a qualifying event to tap into my 401K (job loss), and if I play my cards right, I won't have to pay the extra 10% penalty. I have a total of 160K and 50 is liquid ... so taking out 25K to pay tuition seems like my ONLY option to make getting LPN certification a possibility seem smart -- no age discrimination, growing at 20% ... otherwise I might as well take what I have left, take a vacation, sell my belongings and find a shady spot to live in my car. (53 year old, single, no family, no friends with an "extra room", under water by 70K, no job prospects ... what would you do?)

[tobee43]

cin, i know you want to pay for school, but remember opportunities for funding that school will come in Oct. when you are collecting your benefits from the state. there are programs with reduced tuition, or even free.

also, since you have mentioned in previous posts that you are not planning on staying since your house is so much underwater, you should stop paying your mortgage now and begin to save for the eventual move.

here's how the foreclosure process works in MA step by step:


How are Massachusetts mortgages foreclosed?

"The primary method of foreclosure in Massachusetts involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly called foreclosure by sale. When the mortgage is initially signed it will usually contain a provision called a power of sale clause which upon default allows the lender to foreclose on the property in order to satisfy the underlying defaulted loan which is sometimes referred to as a bond. An attorney usually acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Auctions are conducted by an auctioneer. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method. Judicial foreclosure is often referred to a foreclosure by entry or action. "



Power of Sale Notice Requirements:

"Prior to initiating a foreclosure the lender must record a notice of foreclosure sale in the county in which the property is located.

1. Notice of the foreclosure sale as described above must be served on borrower by registered or certified mail at least fourteen (14) days before the foreclosure sale date. The notice must be published once a week for three (3) weeks prior to the foreclosure sale. The first publication is required to be at least twenty-one (21) days before the sale, and the publication must be in a newspaper in general circulation in the county in which the property to be foreclosed is located.

2. The property is sold at a public auction based on the notice and the time date, and place specified therein. The property is sold to the highest bidder, with a private auctioneer usually conducting the sale.

In Massachusetts, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. This process is called foreclosure by entry or action. The property is then sold as part of a publicly noticed sale by the sheriff. A complaint is filed in court along with what is known alis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

How long does it take to foreclose a property in Massachusetts?

Depending on the timing of the various required notices, it usually takes approximately 75-90 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy."

[keepsmiling]

You don't have to worry about bk right now. Only if they come after you for deficiency.
Local attorneys should give you a feel for whether that's likely to happen.

And- by playing the Hampster Wheel game-- you can hold off foreclosure for a while.

[cin]

Wow this info is very helpful -- You folks are awesome! I can't even TELL you how relieved I am to have found you!!!

[kawh]

... the Hampster Wheel game...

omg, I just looked up what this is, had not heard of it. Sounds like a valid passtime.

[tobee43]

Wow this info is very helpful -- You folks are awesome! I can't even TELL you how relieved I am to have found you!!!

we're pretty much happy that you found us 2

keep...why do you never cease to amaze me LOL!!! i thought that site was a secret, since i haven't heard many talk about it.

[keepsmiling]

we're pretty much happy that you found us 2

keep...why do you never cease to amaze me LOL!!! i thought that site was a secret, since i haven't heard many talk about it.

Tobee my dear friend-- everything I know I learned from the amazing people here.
You can learn a lot when you waste I mean spend as much time here as I do.