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Chapter 13 and a paid for home

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  • Chapter 13 and a paid for home

    I am disabled and get SSDI. My husband works but recently an across the board pay-cut was given by his employer. That made paying bills even harder. I have been very sick due to cardiac issues and now we have over $85,000 in medical debts and climbing. The largest is $77,000 and we just got the letter from collections requesting full payment. Haha. I could write them a check but it would bounce to the sky.

    Our monthly income, after taxes and insurance, is roughly $2300, which includes my SSDI. Our home is paid for but we took out a small loan on it several years ago. We only owe about $2200 on the loan. We talked to an attorney about filing Chapter 7 and they said we would lose our home. We also support our oldest daughter and 2 young grand kids. If we lose our home, they will be homeless too.

    I have been reading about Chapter 13 and it may be an option for us. The big worry is our home. Will we lose it? We live in TN and our home is small and maybe worth about $60,000 or less. I plan to contact another attorney and see what advice they give also. But in the meantime, I am worrying my self sick.

    We do have a couple credit cards but they have about $5000 total on them. We also have a truck loan and one paid for vehicle that is 12 years old and need works, like all older cars do.


  • #2
    Originally posted by Sherri6474 View Post
    I have been reading about Chapter 13 and it may be an option for us. The big worry is our home. Will we lose it? We live in TN and our home is small and maybe worth about $60,000 or less. I plan to contact another attorney and see what advice they give also. But in the meantime, I am worrying my self sick.
    If you're in a Chapter 13 then you have to pay disposable monthly income (DMI) or your liquidation value (as if you were in a Chapter 7). If your liquidation value in Chapter 7 would have been the value of the home, and the home is worth $60,000 unencumbered, then you would have to pay the unsecured creditors $60,000 - Tennessee homestead exemption. The Tennessee homestead exemption is pitiful, but let's just say it's $20,000. So you would need to pay $60,000 - $20,000 = $40,000 to your creditors over the life of the plan.

    If you proposed a 60 months plan, that would be a plan of at least $667/month. I simply don't think you can afford that option.

    I highly recommend that you consult with several more attorneys. Unfortunately I don't think you will receive the answer that Chapter 13 is the answer (because I don't personally think you could afford a Chapter 13). That's just my opinion and I'm not a practicing attorney, so take that with a cup of salt.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Thank you. There is no way we could pay that much each month. We are having a hard enough time as it is. I am going to talk to another attorney Monday. We spoke to one a few months ago, who told us we would lose our home in a chapter 7. She recommended signing our home over to our youngest DD but retaining life rights to the home. Trustees go back 4 years she said, so we would have to try and make it til them. No easy answers seem to be out there.

      Comment


      • #4
        But, what you could do by thinking outside of the box, is make a small monthly Plan payment, one you can afford, and propose that you will use the home as collateral and take out a loan to pay the balance of what needs to be paid. I am going to call this a refinancing.

        The Plan could propose:

        $200 per month for months 1 through 60 and,
        On or before the 55th month, debtors will refinance the home to provide any additional funding that is needed to meet Chapter 7 Reconciliation.

        Run this by your attorney.

        Des.

        Comment


        • #5
          I will ask. Due to the mounting bills, our credit is in the toilet.

          Comment


          • #6
            Originally posted by Sherri6474 View Post
            I will ask. Due to the mounting bills, our credit is in the toilet.
            That's the beauty of the approach. Wait long enough and make Plan payments. That will help in "qualifying". I want my client to be two years post confirmation before attempting a refinance. The drawback you have is that you do not have a long term mortgage on the home now. This means you will be relying upon timely Plan payments only in establishing your ability to pay.

            Des.

            Comment


            • #7
              Excellent "outside the box" suggestion Des. Experience certainly fosters creative solutions!
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog


              I am not an attorney. Any advice provided is not legal advice.

              Comment

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