Mortgage and Chapter 7 - Atty's Advice

[JustChillin]

My income has dropped enough that I cannot afford to stay in my Chapter 13, but I can still afford my house. Payment is $600.00 per month. My attorney wants me to convert to a Chapter 7. I have been able to make my payments on my mortgage post-petition, but I was 2 months behind when I filed in September.

He said to get a temporary part time job for 90 days to pay off this arrearage only. He said he would convert me on 3/17 and I would need to be current by 6/15.

He says as long as I got the mortgage current within 90 days of the conversion date that I would be able to keep my house, is he right?

Is this a crazy idea or is it legally possible? I haven't had a Motion to Lift Stay or anything filed on my property. I have paid my insurance ahead for a year and the property taxes are in the mortgage.

[SinkingFast]

It's gonna depend on the Means Test.

Your temp part time job, how much is that gonna affect your income??

The Means Test is a snapshot in time of you last 6 months of earnings. You need to check out the allowable Median for your State and Family size. Will the additional monies throw you over the Median if you aren't already?? Will the additional monies contribute to more disposable income that could be included in your Ch 13 plan payments??

This advise sounds kinda hinky to me. When you are in a 13 plan, you are supposed to report any significant income changes to the Trustee. The Trustee then ammends the plan accordingly. If you pick up a temp job where the employer pays by check, deducts taxes, soc sec, and medicare payments, the Trustee could potentially discover the income.

On the arrears,.......... You can't keep your house thru a Ch 7 with arrears. The property would be liquidated. The filing date freezes a moment in time of the status of the estate. I'd think it would be best to be current at the time of filing. But, I am not an attny, so I may be wrong. You may have the additional time to catch up on your arrears.

[StaciMM]

Good news: If you filed under old law and convert under new, your ch. 7 will be based on old laws.

Another idea would be to talk to your mortgage co. to see if they will work something out with those payments. (And I'm guessing the arrearage was put into your 13, so a little of that may have already been paid back.)

[SinkingFast]

Good news: If you filed under old law and convert under new, your ch. 7 will be based on old laws.

Another idea would be to talk to your mortgage co. to see if they will work something out with those payments. (And I'm guessing the arrearage was put into your 13, so a little of that may have already been paid back.)

Duh! Good point, Staci. I forget the Old Law/New Law thing sometimes!

[JustChillin]

My income dropped $800.00. I reported the income drop to my attorney. Trustee won't work out a plan, since she says it isn't feasible to work out a reduced monthly payment. This trustee likes HUGE Ch. 13 payments.

Attorney's advice: Convert to a Chapter 7. The mortgage company will HAVE to file a Motion to Lift Stay. I will have 20 days to answer. Then it gets scheduled for a preliminary hearing, then a final hearing. He said that would take some time. If I can show that I can pay the pre-petition arrearage by the final hearing which would be early June (based on the current docket) that the motion will be denied and I keep the house.