Should we file?

[Curious]

Hey there,
I was wondering if I could pick up some advice from some people out there.
Here's out financial situation:
1st mortgage= $189,000.00
2nd mortgage= $24,700.00
Car loan= $12,000.00
Credit cards= $4,500.00
We have had a dramatic decrease in income over the last 3 years due to loss of a job (my FT job), disabilities (my hubby), and lack of work (my hubby).
We've had our house up on the market since August 2006 (we've decided to move from IL to MO where work is much more readily available to us both), with no luck in selling it all. We've even tried finding renters..but again no luck.
We can't afford it here, and even if we were to sell our house for our current asking price, we'd be walking away with no profits and still owing over $30,000.00 in debt. Even after we make the move, we still wil only have about $300.00 left over at the end of the month, at that rate we're thinking it's gonna take us 5-7 years to pay off all that debt anyway...so why not file right?
We don't really want to, as we had planned on purchasing land in MO in a couple of years and hopefully building a home on it (or finding something with an existing home on it).
We would appreciate any advice at all.
Thanks!

[lrprn]

Sounds like your house with that huge first mortgage and smaller second one is killing you financially, curious. Also sounds like you have done your best to sell it and also find someone to take the payment over by renting without any luck - it must be very frustrating to be trying to sell during such a weak time in the market for sellers.

You asked about filing bankruptcy - you didn't say whether your income is now above or below the IL median. Which chapter are you thinking about filing? How much equity (if any) do you have in the house? Is the car worth $12,000 now or is that loan upside down? Do you have other cars? Do you own any other secured assets? Do you have children or other dependents? It will help us help you better if you can share more details about your situation.

[Curious]

Trying to sell in this market has been frustrating beyond measure.
OK, let's hope I can answer all the questions.

Our income is around $35K-$40K annually (quite a drop from the $80K we use to bring in when we orignially purchased the home). I'm not sure what the median income is for IL, but that's where we're at anyway.

We're considering Chapter 7. The van is not worth $12,000.00 right now. We do have another vehicle (my husband's truck). We have no equity left in the house (seeing how we've used it all to keep our heads above water for so long). We have one daughter, and another baby due in June.
We also owe my father-in-law $5K for a personal loan we took from him last year (for bills), and have considered signing my husband's truck over to him (but I think that he would still let us use it until we can "buy" it back from him). In which case, we'd only be left with our van under our name (which is the one that we owe the $12K on). Our main concern is that we're going to lose assets, and not be able to replace them. The stuff we own free and clear consist of my husband's truck, many, many tools (hy hubby needs for work)..some furniture, appliances and electronics. My husband also has an annuity fund that we're concerned about losing as well.

We've also entertained the idea of trying to sell our home for enough money to pay off the first mortgage and closing costs, and then file for bankruptcy for the remaining balance due of our debt. We thought maybe that would look better on our credit if the house showed as "paid" and not discharged with bankruptcy. But, with this option I'm not sure how it would work with the line of credit on our house. Could we legally sell the house, pay off the first mortgage but not the second one?

If I missed anything let me know..thanks.

[SinkingFast]

Whether you're living in MO or IL, you're definitely under the Median for either State.

http://www.usdoj.gov/ust/eo/bapcpa/2...anstesting.htm

Click on the Median Family Income link to view the chart.

If you've moved from IL to MO and you've lived in MO less than 2 years, you're gonna have to use IL Exemptions.

Generally speaking, most States don't allow for the primary or 1st mortgage to result in a deficiency balance that you'd be responsible for. That may not be the case in IL. You'll need to research that. If you're living in MO, attnys there won't have a handle on IL Law. It's much cheaper for you to learn that info on your own.

That 2nd mortgage most likely will become Unsecured if the property moves to Foreclosure or you Short Sale. In either situation, you'd be personally liable for any amount the Lender does not recover. And just because your principal balance is $24,700,............. Don't count on that being the final $$$ amount you owe.

Mortgage Lenders tack on all Lates, Penalties, Interest, to your principal balance. If the property moves to Foreclosure, the Lender is gonna add Legal Fees as well. Our house went into Foreclosure but we got lucky to sell it. With only 5 missed payments, our pay-off was $8K more than our principal balance. All the lates, penalties, interest, fees, and legal fees were added into our pay-off.

Don't transfer the truck to Dad. 2 Reasons.

Dad is an Insider. Family, friends, close business associates are Insiders. The BK Court looks back 1 year on transfers of money or property to Insiders. If you give Dad the truck and then do file BK, the Court can go back to Dad and take the truck from him, or make him pay $$$'s to keep it.

You may be able to cover the Truck with Exemptions anyway. IL allows a $1200 Vehicle Exemption, a $750 Tools of the Trade Exemption, and a $2K WildCard Exemption to apply to any property you wish. The Vehicle Exemption can be doubled if you both file. Not sure about the WildCard as this website does not specifically say.

http://www.legalhelpers.com/legal_he...ptions_il.html

If you do wind up filing BK, you can list Dad as a Creditor in the BK if you want. There's no Law that says you cannot voluntarily repay any debt to any Creditor after your BK is done. So you can repay Dad somewhere down the road. It's perfectly legal. You just don't wanna set yourself up for problems BEFORE you file.