Voluntarily dismiss? Amend? or convert to Chapt 7?

[VAREDUX]

I came here for answers, but after reading a bit I have new QUESTIONS! I filed Chapt 13 in Feb 2009 to temporarily stop foreclosure until the end of the school year so the kids' lives wouldn't be so disrupted. Now that we've moved, and the foreclosure resumed and finalized, I had thought I had only two options - either leave my Chapt 13 voluntarily dismissed (which it is now), and work out settlements privately with my unsecured creditors, OR file Chapt 7 after the vol. dismissal. The choice depends on whether or not the mortgage companies expect me to repay the difference between the foreclosure sales price and their loan balances. If they do: Chapt 7. If they don't (and instead charge off the debt), stay simply dismissed. BUT now I realize there MIGHT be another option under the latter scenario - have my atty AMEND my Chapt 13 filing to just include the unsecured debt, now that the secured debt is theoretically satisfied by the foreclosure.

The appeal of this new idea is that although I COULD work out settlements with my creditors, I'm struggling financially right now and might not be able to offer them enough. Even more of a problem if they want to add on interest for the length of time I was in Chapt 13 and they were only getting pennies on the dollar. However, if the previously secured debt (the past due mortgage amount at the time of the first foreclosure motion) is still attached to the Chapt 13 repayment plan, it would make more sense to go file Chapt 7.

UNLESS that previously-secured debt can now be treated as unsecured debt and repaid at <100% in the Chapt 13 plan?

So many questions!!! My attorney has been no help.

[HHM]

What possible reason could you have for wasting money settling with your creditors? I see no upside in that scenario.
If you qualify for a 7, do the 7. Since there is no more reason to stay in a chapter 13 to "save" something, if you can qualify for the 7, you do the 7. It doesn't matter what the bank decides to do with the mortgage deficiencies, why even leave it in their hands, take control, file the chapter 7, and discharge all your debt.

It really is that simple

[VAREDUX]

Oh to be that decisive! :-) Why bother settling with creditors? Because I would want to, if I could. The house I feel no sense of guilt over. Even though it was an insane mortgage (80/20 split, no PMI, no money down, interest-only 5-yr ARM, and NO INCOME VERIFICATION - important because my husband was on self-styled sabbatical of sorts from his REAL job), we would have been okay - theoretically. Our incomes were projected to increase, we planned to improve the house, we were prepared to deal with the rate adjustment. And if he'd followed through with his promise to return to his regular line of work, we'd have been able to ride out the economic crisis. On the flip side, if it had JUST been a matter of him dropping the ball, and the house was still appreciating as "usual", I'd have simply sold the darned thing, at least broken even, and walked away with my credit - if not my heart - intact. But because I got hit with a double whammy - through no fault of my own, I ended up here. And I'd run up some credit cards to cover expenses when I still had hope it would all work out. Those are legitimate debts. Like the overdue library book fines. And the Home Depot account. And the dentist bill. If there'd be any benefit to avoiding a Chapt 7 bankruptcy on my credit, I'd work something out. HOWEVER, you may be laughing out loud at the idea that I'm trying salvage something of my credit after I've had a FORECLOSURE and a CHAPT 13 DISMISSAL. This is already as bad as it gets, isn't it?

[HHM]

Correct, there is nothing to salvage on your credit. Your focus needs to be in your financial circumstances and your long term financial goals. When I say, don't waste money settling, it is because the money you would pay them can be put to better use.

[NoMoreCards]

At this point, you need to let go of the guilt and just file the 7 and get it over with. You really have no credit to salvage, in the slightest after both the CH 13, and the foreclosure. Since your credit is on the floor anyhow, it makes sense to me to let it bottom out and walk out debt free.

This stops any chance (or worry) that the mortgage lender can come after you later for the balance. It ends the major financial uphill climb you are considering.

I wish you the best, but if I walked in your shoes I'd be filing today and looking to the upside tomorrow.

[VAREDUX]

Thank you! Now I just have to decide if I'm going to have my Chapt 13 attorney handle my Chapt 7, or shop around for a new (cheaper) one. I picked the current one because I needed an eleventh-hour filing and he was the only one who said no problem. My case was filed with the court just hours before that first foreclosure auction was scheduled.

Or maybe I'm just overly fond of dilemmas? :-)

Thanks again, both of you! Very helpful!

[justbroke]

Oh to be that decisive! :-) Why bother settling with creditors? Because I would want to, if I could.

You do so under terms that you can live with. The beauty of a Chapter 7 discharge, or any discharge under Title 11, is that you could pay back creditors, if you so choose, and only at the amounts you deem reasonable and fair. Nothing in the code prevents this. You have to start thinking of this as a business decision. It's not a morality question. If you're seeking a morality lesson and consider the Holy Bible a source of that, then look no further for inspiration.

Like the overdue library book fines. And the Home Depot account. And the dentist bill.

Except for HOme Depot, you could still pay those others. I believe that Library Book fines are statutory and "fines" so they are non-dischargeable anyhow.

If there'd be any benefit to avoiding a Chapt 7 bankruptcy on my credit, I'd work something out. HOWEVER, you may be laughing out loud at the idea that I'm trying salvage something of my credit after I've had a FORECLOSURE and a CHAPT 13 DISMISSAL. This is already as bad as it gets, isn't it?

You are already done. A foreclosure is on your credit report for 10 years as a civil judgment. The Chapter 13 is already there for 7 years. I don't know why you believe that avoiding Chapter 7 is somehow going to improve your credit. It is a well known fact that people two years out of a Chapter 7 discharge have better credit than the average person. Even the day after a Chapter 7 discharge, people have better credit and start receiving credit offers.

I think you're missing the whole point and picture of what HHM is telling you. This is very good advice. In the end, you'll probably be dragged out in judgments and lawsuits for the next 10 years, and still have 10 years of bad credit after.

Realize that you need a discharge of your debts now, and stop the stress.

[VAREDUX]

Thank you! :-) I'm so glad I found this forum!