Road to BK13 - Thoughts?
Hello all -
I've been lurking for awhile and thought I'd post my situation and get any additional thoughts as I continue to move it forward. I'll try to make it short, and would appreciate any feedback you have!
My situation:
* I'm currently employed & married w/ 2 kids
* I live in Arizona
* I own a home that is worth today ~$430k that we have lived in since 2005 as our primary residence. I have not yet done an appraisal confirming the value.
* It is a priority to keep the home, if possible.
* I have a primary mortgage for $462k and a HELOC for $250k. $125k of the HELOC was been drawn from post closing and was not used as purchase money for the home, or to substantially improve it. (Used for bills, living expenses, etc. over the last 4+ years)
* My primary mortgage is a 10 year IO (matures 2015) fixed interest rate (6.125%) and HELOC has 10 year draw period (~2017) and variable interest rate (3.75% - Libor + .5%). HELOC can not be drawn from anymore.
* I have $43.7k of credit card debt. All credit cards are maxed.
* I have $17.5k of student loans
* I have $25k remaining on a 401k loan (I shouldn't of taken the loan now that I know the protections that 401k's have)
* I potentially get a 25k bonus (based on company performance, not sure if we'll get it) in late January, and a smaller bonus 10k in late March.
* I'm current on all payments except for my HELOC (for negotiation purposes)
* I feel secure in my job, and the field of expertise I'm in is in high demand and I could transition easily to another employer if needed.
* I have a LLC that I run "side work" through.
My concerns:
* Current expense of all debts not affordable, and definitely would not be affordable as LIBOR increases, or the loans become 20 year amortizing loans in 2015 for the balance of $712k
* At some point, the home value could go above $462k making the lien stripping not an option.
* My understanding is since we used part of the HELOC monies *not* for purchase money / to substantially improve the home that the anti-deficiency laws for Arizona do not apply to us and we would be at risk in a foreclosure / short sale. (Can someone confirm?)
I'm working on:
* Getting #'s ready to convert cars to a 60 month purchase (they're currently leases) if I go the BK13 route.
* Negotiating with HELOC to settle debt and understand what the terms would be. The negotiation with them is they are currently unsecured debt, and will either get money through the BK13 repayment, or through settlement. A settlement now would get them more money. Settlement "drop dead" date is end of November 2010 has been communicated to them and hopefully is putting me at the top of the pile.
* Working with attorney to get BK13 paperwork prepared ASAP so I understand the budget / repayment plan.
* I'm considering getting appraisal since potential value of home is so close to primary mortgage.
* Filing BK13 in December / Early January if HELOC negotiations fail.
Questions I'm still researching / still bugging me (and maybe you can help)
* Confirming that I am "at risk" due to using HELOC for non-purchase monies in foreclosure / short sale
* Confirming there is no "cram down" provision to take my first mortgage down to current market value.
* How recent do appraisals need to be when filing to strip off a lien?
* Depending on the date I file, what would happen to future raises money, future bonus money, future side work money?
* What would happen if I'm able to keep bonus money / side work money and was able to "pay off" the amount due for the 5 year plan early?
* How does the "Health Flexible Spending" deduction get accounted for in the plan?
* How does the Social Security tax get accounted for in the plan? (I reached the max in ~July and no longer have paid that tax, until January rolls around again)
* How does an employer sponsored "tuition reimbursement" (75% of tuition) get accounted for in the plan? Are student loans still able to be obtained while going through BK13?
* How much should the BK13 process cost with an attorney? Should a lien stripping cost more? Do they / should they get paid upfront?
* How big of an impact will the "reputation impact" be by now having a BK on my record for the rest of my life?
Next Steps:
* Get appraisal to confirm current value of home.
* Settle with HELOC. If HELOC not settled by end of November, go BK13 route.
In short, I feel like by researching, and potentially going the settlement / BK13 route now - I will be in a better position immediately, and in 5 years. Whereas the "doing nothing" approach in 5 years (assuming I just "pay the minimum" and am able to stay afloat) probably leads to a foreclosure of the home.
Potentially the HELOC settlement comes in at a monthly payment close to the current HELOC payment anyways. If we don't go the settlement route, and we choose BK13 instead (only if the lien stripping continued to be an option) then we at least put ourselves in a position to be in an equitable position with the home in 5 years - and don't need to come up with the cash to own any other home (ie: the foreclosure / purchase new home route) including the headache and disruption of moving the family.
Thanks for reading this if you got this far...
Thoughts?
Even if they're comments that I'm thinking about the right things - it'd be great to hear at this point.
I've been lurking for awhile and thought I'd post my situation and get any additional thoughts as I continue to move it forward. I'll try to make it short, and would appreciate any feedback you have!
My situation:
* I'm currently employed & married w/ 2 kids
* I live in Arizona
* I own a home that is worth today ~$430k that we have lived in since 2005 as our primary residence. I have not yet done an appraisal confirming the value.
* It is a priority to keep the home, if possible.
* I have a primary mortgage for $462k and a HELOC for $250k. $125k of the HELOC was been drawn from post closing and was not used as purchase money for the home, or to substantially improve it. (Used for bills, living expenses, etc. over the last 4+ years)
* My primary mortgage is a 10 year IO (matures 2015) fixed interest rate (6.125%) and HELOC has 10 year draw period (~2017) and variable interest rate (3.75% - Libor + .5%). HELOC can not be drawn from anymore.
* I have $43.7k of credit card debt. All credit cards are maxed.
* I have $17.5k of student loans
* I have $25k remaining on a 401k loan (I shouldn't of taken the loan now that I know the protections that 401k's have)
* I potentially get a 25k bonus (based on company performance, not sure if we'll get it) in late January, and a smaller bonus 10k in late March.
* I'm current on all payments except for my HELOC (for negotiation purposes)
* I feel secure in my job, and the field of expertise I'm in is in high demand and I could transition easily to another employer if needed.
* I have a LLC that I run "side work" through.
My concerns:
* Current expense of all debts not affordable, and definitely would not be affordable as LIBOR increases, or the loans become 20 year amortizing loans in 2015 for the balance of $712k
* At some point, the home value could go above $462k making the lien stripping not an option.
* My understanding is since we used part of the HELOC monies *not* for purchase money / to substantially improve the home that the anti-deficiency laws for Arizona do not apply to us and we would be at risk in a foreclosure / short sale. (Can someone confirm?)
I'm working on:
* Getting #'s ready to convert cars to a 60 month purchase (they're currently leases) if I go the BK13 route.
* Negotiating with HELOC to settle debt and understand what the terms would be. The negotiation with them is they are currently unsecured debt, and will either get money through the BK13 repayment, or through settlement. A settlement now would get them more money. Settlement "drop dead" date is end of November 2010 has been communicated to them and hopefully is putting me at the top of the pile.
* Working with attorney to get BK13 paperwork prepared ASAP so I understand the budget / repayment plan.
* I'm considering getting appraisal since potential value of home is so close to primary mortgage.
* Filing BK13 in December / Early January if HELOC negotiations fail.
Questions I'm still researching / still bugging me (and maybe you can help)
* Confirming that I am "at risk" due to using HELOC for non-purchase monies in foreclosure / short sale
* Confirming there is no "cram down" provision to take my first mortgage down to current market value.
* How recent do appraisals need to be when filing to strip off a lien?
* Depending on the date I file, what would happen to future raises money, future bonus money, future side work money?
* What would happen if I'm able to keep bonus money / side work money and was able to "pay off" the amount due for the 5 year plan early?
* How does the "Health Flexible Spending" deduction get accounted for in the plan?
* How does the Social Security tax get accounted for in the plan? (I reached the max in ~July and no longer have paid that tax, until January rolls around again)
* How does an employer sponsored "tuition reimbursement" (75% of tuition) get accounted for in the plan? Are student loans still able to be obtained while going through BK13?
* How much should the BK13 process cost with an attorney? Should a lien stripping cost more? Do they / should they get paid upfront?
* How big of an impact will the "reputation impact" be by now having a BK on my record for the rest of my life?
Next Steps:
* Get appraisal to confirm current value of home.
* Settle with HELOC. If HELOC not settled by end of November, go BK13 route.
In short, I feel like by researching, and potentially going the settlement / BK13 route now - I will be in a better position immediately, and in 5 years. Whereas the "doing nothing" approach in 5 years (assuming I just "pay the minimum" and am able to stay afloat) probably leads to a foreclosure of the home.
Potentially the HELOC settlement comes in at a monthly payment close to the current HELOC payment anyways. If we don't go the settlement route, and we choose BK13 instead (only if the lien stripping continued to be an option) then we at least put ourselves in a position to be in an equitable position with the home in 5 years - and don't need to come up with the cash to own any other home (ie: the foreclosure / purchase new home route) including the headache and disruption of moving the family.
Thanks for reading this if you got this far...
Thoughts?
Even if they're comments that I'm thinking about the right things - it'd be great to hear at this point.
Comment