How much will we have to repay?

[concerned]

We owe $224,000 secured debt, $20,000 unsecured debt. We are trying to get out from under the SECURED debt.

Questions:

1. If they reposess our home and sell it for less than $224,000, what happens to the remainder?

2. Does it roll over into your unsecured debt total?

3. Does it have to be paid back under Ch. 13?

4. If so, what percentage of your total debt do you have to pay back under the current law & new law?

5. Is it your total disposable income?

6. What if that total disposable income per month X 5 years under the new law is more than what you have to pay back (see example below)?

7. Do they lower your payment or the amount of years you pay?

Example: Secured debt of 224,000. House is repossessed and sold at auction for 200,000. 24,000 remains plus 20,000 unsecured debt for a total of 44,000. If they feel our disposable income is 1,000 per month then over a minimum 5 year repayment under the new law, we would pay back (1000/month x12 months x5 years for a grand total of 60,000). They can't possibly make us repay more than our total debt.

[StaciMM]

The basic provision of a ch. 13 is that all of your disposable income goes into the plan. Right now, that plan can be as short as 36 months or as long as 60. After the laws change, all 13's will be 60 months long.

What I understand of the amount: the unsecured creditors have to get at least as much as they would if you filed ch 7. So if you were keeping your home, and you had $20,000 in equity over what your state allows for an exemption, at least $20,000 would need to go to creditors. From what you've posted, this really isn't an issue for you I think. (You're not keeping your house and that is generally the largest asset.)

[concerned]

StacieMM

What I understand of the amount: the unsecured creditors have to get at least as much as they would if you filed ch 7. So if you were keeping your home, and you had $20,000 in equity over what your state allows for an exemption, at least $20,000 would need to go to creditors. From what you've posted, this really isn't an issue for you I think. (You're not keeping your house and that is generally the largest asset.)

Yes, we are giving up our home, but won't we still have to pay the banks for their loss on it. If the bank can only sell it for $200,000, would we have to pay $24,000 + our other unsecured debt of $20,000 over 5 years or $733/month? Is this how it works? We wouldn't have to pay more than we owe right?

[StaciMM]

The loss on your home is counted the same as other unsecured creditors. So, if you have no assets over the exemption levels, there is no preset minimum to pay back. Its just based on your income, less expenses. And that (your disposable income) becomes your plan payment, where part goes to the trustee, part probably goes to your attorney, and the rest goes to the creditors.

[concerned]

My concern is that if we move into an apartment we will have more disposable income. It almost seems like we would be paying the same amount as if we were in the house. For example, in the above scenario, we would owe $733/month. If we have to repay more than this amount of money, the banks are making out!! Am I missing something? How does it help us to file? My husband said that at least we will be out from under the house and free of debt in 5 years. Is that all we will gain? He also said that we will have more free income for things we don't have in our current budget: clothes, etc.

[bezoar]

I may have missed something - how much disposable income do you have NOW, as if you were to stay in the house & pay the mortgage payments and associated expenses of home ownership?

[concerned]

After all our bills, with $600 per month for food/miscellaneous & $600 for gas (family of 3), we are in the hole by $138. My husband has been working overtime just within the past couple weeks for a little extra, but it is killing him. He needs to go to an allergist and he won't take the time because we need the money so bad. We go back and forth on if we're doing the right thing, but he said that at least with the new plan we would have a decent budget even for things we don't have money for now. Is he right?

Is there a web site where you can see what you are allowed under the new plan for items such as food, transportation, etc.?

[StaciMM]

BK isn't right for everyone-that is what you have to work out between you, your husband, and your attorney. If you have a significant amount of disposable income (after moving into an apartment) & limited unsecured debt, then trying to work something out directly w/ the lender might be a good move.

Filing BK when so much about your situation is up in the air could be disaster.

PS-the most you'd repay in 13 is 100%, plus your attorney's fee and trustee fee.

[concerned]

StacieMM

After all our bills, with $600 per month for food/miscellaneous & $600 for gas (family of 3), we are in the hole by $138. My husband has been working overtime just within the past couple weeks for a little extra, but it is killing him. He needs to go to an allergist and he won't take the time because we need the money so bad. We go back and forth on if we're doing the right thing, but he said that at least with the new plan we would have a decent budget even for things we don't have money for now. Is he right?

Is there a web site where you can see what you are allowed under the new plan for items such as food, transportation, etc.?

[bezoar]

Strictly from a tactical standpoint, it would seem that if you were to file Ch 7, choose to "RETAIN" the house, get thru the process and then (if you choose to) give up the house a few months after discharge, you'd be in a better "place", no matter what becomes of your marriage - but maybe I'm missing something here...

edit:
oops - looks like you're talking about filing under the new laws - nevermind...

[StaciMM]

If the upside down budget is based on the house (that you're not going to be paying after BK) then there may be issues. Generally, you can't count what you're trying to discharge. And, you do have an apartment lined up so you know your apartment rent is less than mortgage 1st & 2nd.

It would be like someone who is at or slightly over their budget due to a $500 credit card payment, so without that payment they have almost $500 extra monthly.

Search RickD's posts about the Means Test-he has a great link that you run some #'s with.

[concerned]

Thanks!

I will search under RickD's posts. Basically, we have a mortgage (1720) and a home equity (434), and then we also have a line of credit that was used to purchase our land (326). These total $2480. I see what you mean about the ch. 7, but we would only be able to wipe out the $326, right? We have a small amount of credit card aside from the land payment--just $3500 or so. That's why we thought our only realistic option was to give up the house. On the other hand, I'm not sure we're prepared for life in Ch. 13, especially under the new plan.

But.....if we do stay in the house, how will we get out of my apartment lease?

[StaciMM]

If you file BK and include the house, you have no responsibility for it. Meaning even if they can't sell it for years, its their issue - not yours. I don't know how that would work if you filed 13, in determining how much you would pay to the lender. (Most who file 13 do it to save their home.)

If you think that a legal separation is going to happen, then you will likely be better off getting that squared away first. If you file individually, yes you pay 2 filing fees, etc. but you also get to each count your living expenses.

Regarding the lease-have you just completed an application or have you actually moved in? If you haven't moved in, you should be able to cancel and just forfeit your application. Read over what you signed.

[StaciMM]

Concerned-post what info you get out of the Means Test-how does your state's figures compare to your individual incomes?

[StaciMM]

Concerned-what is your home worth & what state do you live in? There is something I want to look for info on. I've read about 2nd mortgages being stripped away if they eat into your exemption or if there isn't enough value in the house to secure them. I don't know if this applies to a 7 or 13. But-if there were a way to file BK, keep the house but get rid of the equity line debt & $24k in unsecured debt, that might make things right for you. (And you wouldn't have to worry about the apartment lease-include them in the BK.)

HMM-does anything in what I've just said make any sense? I have to go hunting for information but I'm sure I've read something about that.