House in TX and Pick-A-Payment

[OnlyBrokeOnce]

Okay, I refi'd a little over a year ago and went with a "pick-a-payment" plan which essentially gives you options for your monthly payment.

Pay the full P+I each month
Pay the I each month (interest only)
Pay part of the I each month and defer the unpaid interest.

I have NEVER BEEN LATE OR MISSED A HOUSE PAYMENT -- EVER EVER EVER.

Now, I'm not planning on missing a payment either. My house payment (option 3) is less than $400/month. If I up it to P+I, it will be $700/month. I can't lease a 1 BDRM apt in my city for that much.

My question is this. If I file BK, will the interest deferred override my homestead option? In TX you can't lose your house in BK unless you ARE DELINQUINT. With the new laws you have to live in your house for 3 yrs 3 months (or something like that) for the homestead exemption to be in effect (federal rules). I've lived here 9.5 years, it's not going to be a problem in that regard.

Now, I can take the stock I've sold and bring it up to speed, but we're also still in our SLOW SLOW season and have been living on CC's this winter. I'd rather stop living on CC's (they're just about maxed anyway) and use the stock for living expenses. If the house with the DEFFERRED interest isn't at risk, I'd rather just do that.

Anyone know? Gotten 2 different answers from 2 different lawyers.

[StaciMM]

I'm really not sure, but if you claim the higher payment on your bk schedule, be prepared to show that you've been paying it. The court might be inclined to use the lesser option.

[OnlyBrokeOnce]

Good point!

1) I'm not filing until August or September. Need to put some time between these past cash advances and the BK.

2) I'm changing the payment (it's autodraft) to become effective March 1st (Spring season starts, lawnmowers can be cranked up and money rolling in) for the higher payment.

[SinkingFast]

We don't live in TX, but "Debtor Friendly States" came up in our Consults with attnys. The explanation we got for the reform was rich folk buying a multi million dollar home in a DFS such as Florida or Texas, where they would get unlimited homestead exemption, and then file BK. DFS's were also havens for more regular folk who knew enough to plan their BK's.

Didn't the reform come with a mandatory $125,000 homestead exemption cap?? That would be the market/appraised value of your home minus your mortgage. If the difference is less than $125K, you have nothing to worry about. You could own a home worth $225K with a $100K mortgage and be safe.

Question is, where does the deferred interest come into play there?? According to what I've read about deferred interest mortgages, excess interest is added back to your principal balance as it accrues. Evidently the interest is fig'd on a daily or monthly basis. Cause, if the true interest rate is lower than your mort, your payment pays down the principal faster than a normal mortgage.

You need to chat with more attnys and maybe call your lender as well. Check with the lender and get a current pay-off. Get a breakdown of principal balance seperate from fees. Call a Real Estate Agent and "pretend" you are considering selling. The REA will run a Competitive Market Analysis for you to give you a good figure for the FMV of your home. Subtract your mortgage and you'll have the value of your equity in the home. If your equity is less than $125K, your homestead exemption is safe.