Planning BK and home walk away

[monster1234]

First mort is 119K ($1100 mo pymt), second mort is 55K ($435 mo pymt), both with Citimortgage. Home is maybe worth 118K, probably less. Our take home pay used to be $4000, but since March 2008 has now dropped to $2800. We have been able to stay afloat selling play toys (trucks, rec vehicles).

Have been to BK attorney, currently gathering info for BK. Attorney wants to do Chap 13, I want to go Chap 7, if I can get husband to give up play toys.

We need stay in home until kids kids graduate from high school in June of 2009, but need to be able to walk away after that to move to another state to be near elderly parents.

We are now having trouble making payments, one week late on first, two weeks late on second.

What do I need to do, to stay in this home without worry of eviction? How much time do I have of paying less than mortgage amounts? Should I contact mortgage company before or after BK?

[HHM]

Your situation is more of a timing issue than one of which BK to file.

I presume that with $2,800 per month of income, you are below you state's median income, correct? Thus, you qualify for a chapter 7. You didn't mention any unsecured debt, but I assume you probably have some...if so, how much?

First question, what state do you live in, as that will give us your foreclosure timeline.

Your attorney is probably thinking chapter 13 because he can probably get rid of the 2nd mortgage. But even then, an $1,100 per month payment with only $2,800 coming in is still too high.

To make it to June, you would need to keep paying the first, and in November, stop paying the second (also, stop paying any credit cards). No matter where you live, foreclosure usually averages 4 months (some states a little shorter, some states a little longer). Since the 2 mortgages are with the same lender, (although there may still be different owners), I will assume the standard foreclosure timeline.

Foreclosure won't typically start until your 3rd missed payment, so that gets you January, then foreclosure, itself, will probably take 4 months; which gets you till April. Once foreclosure begins, you stop making your first mortgage payment. You file BK right before the sale date, and that gets you another 2 months.

Frankly, that is the conservative estimate of the timeline, you probably have much longer.

[monster1234]

Unsecured debt is about 30K
Secured debt is 21K car loan, vehicle surrendered
We live in Florida.