Chapter 7 Conversion Delima Help

[Billssuck]

Hello!

It's been quite a while since I have been on this forum. I just wanted to see if I could get some advice/recommendations for converting our case from a chapter 13 to a chapter 7. I have a phone conference scheduled with my original attorney tommorrow morning.

Background: We barely qualified for a chapter 13 when we filed last May (i.e. under the median income and a DMI of $140). Actually, the attorney "made the numbers fit" for the DMI; my calculations showed us with a negative DMI. Anyway, I went with his numbers because he said a few things would be scrutinized in a ch7 because we had an adult son living at home (HH size of 4 then), I have a significant business expense payment to me each month on my pay stubs that would be looked at closely, and our house mortgage payments are too high to fit a chapter 7. We are and have always been current on our mortgages.

Then October 31st rolls around and my husband is laid off from his job. He applied for literally hundreds of jobs and finally found one that started March 1st. The problem is that it pays $165 less per week than his original job. That's a significant decrease when your DMI was originally calculated at $140/month. Also, our mortgage payment has gone up twice in the last year since we filed because our homeowners insurance went up and thus the escrow payment had to go up. We have cut corners the best we could these last 4 months and have made the trustee payments on time as well as the mortgage. But these last two weeks, after paying all of our bills, we had $60 for food for two weeks...that's just not doable for a family of three.

When my husband got laid off November 1st, I contacted my attorney and he steered me away from a conversion to ch7 then stating that we could loose one of our cars and the house payment issue (I really don't understand that but I will find out more tomorrow). At this point, I am ready to put the house up for sale and/or surrender it if needed. I honestly feel like the house owns me (and not the other way around) and that I am a prisoner to it. As far as the cars go, we have 4 very older cars and two of them are now unfunctionable...one of them (a tool of my trade for my job) has a completely cracked frame and has no value except for parts. The other one has an anti-theft system problem that we haven't had any money to have it looked at. Also to boot, we owe $1,100 in federal taxes this year (unexpected...we usually get back a couple thousand) and I don't know how we will pay it.

I have pulled our pay stubs and unemployment benefits for the past 6 months and as a family of 3 (my adult son is living on his own now), we are about $1,000 below the median income for our state for a year ($500/6 months). I haven't refigured the DMI, but I see no way that it can be a positive number. Also, I do not believe that we have any equity in our home after the mortgage and HELOC because things have not changed much since we originally filed for home values in our area (we we're -$7K). For the cars, we may have a little bit of non-exempt assets but with one of them not worth anything, I highly doubt it will be much (less than $2K).

Does anyone have any advice/recommendations to give me? I really think my attorney is going to try to keep me in the chapter 13 when we are a valid ch7; he always has done this in the past. But we just can't live with our high mortgage payments and the decrease in my husband's income. If you look at my signature below, my chapter 13 payments are only $125/mo and he looks at that payment as a minor amount to keep our house. I really don't think it is smart for our financial future to keep it; I'm just not sure of the process to surrender it in our current economy when we are current on its payments.

Any comment will be greatly appreciated!

[newbie2]

Hello!

It's been quite a while since I have been on this forum. I just wanted to see if I could get some advice/recommendations for converting our case from a chapter 13 to a chapter 7. I have a phone conference scheduled with my original attorney tommorrow morning.

Background: We barely qualified for a chapter 13 when we filed last May (i.e. under the median income and a DMI of $140). Actually, the attorney "made the numbers fit" for the DMI; my calculations showed us with a negative DMI. Anyway, I went with his numbers because he said a few things would be scrutinized in a ch7 because we had an adult son living at home (HH size of 4 then), I have a significant business expense payment to me each month on my pay stubs that would be looked at closely, and our house mortgage payments are too high to fit a chapter 7. We are and have always been current on our mortgages.

Then October 31st rolls around and my husband is laid off from his job. He applied for literally hundreds of jobs and finally found one that started March 1st. The problem is that it pays $165 less per week than his original job. That's a significant decrease when your DMI was originally calculated at $140/month. Also, our mortgage payment has gone up twice in the last year since we filed because our homeowners insurance went up and thus the escrow payment had to go up. We have cut corners the best we could these last 4 months and have made the trustee payments on time as well as the mortgage. But these last two weeks, after paying all of our bills, we had $60 for food for two weeks...that's just not doable for a family of three.

When my husband got laid off November 1st, I contacted my attorney and he steered me away from a conversion to ch7 then stating that we could loose one of our cars and the house payment issue (I really don't understand that but I will find out more tomorrow). At this point, I am ready to put the house up for sale and/or surrender it if needed. I honestly feel like the house owns me (and not the other way around) and that I am a prisoner to it. As far as the cars go, we have 4 very older cars and two of them are now unfunctionable...one of them (a tool of my trade for my job) has a completely cracked frame and has no value except for parts. The other one has an anti-theft system problem that we haven't had any money to have it looked at. Also to boot, we owe $1,100 in federal taxes this year (unexpected...we usually get back a couple thousand) and I don't know how we will pay it.

I have pulled our pay stubs and unemployment benefits for the past 6 months and as a family of 3 (my adult son is living on his own now), we are about $1,000 below the median income for our state for a year ($500/6 months). I haven't refigured the DMI, but I see no way that it can be a positive number. Also, I do not believe that we have any equity in our home after the mortgage and HELOC because things have not changed much since we originally filed for home values in our area (we we're -$7K). For the cars, we may have a little bit of non-exempt assets but with one of them not worth anything, I highly doubt it will be much (less than $2K).

Does anyone have any advice/recommendations to give me? I really think my attorney is going to try to keep me in the chapter 13 when we are a valid ch7; he always has done this in the past. But we just can't live with our high mortgage payments and the decrease in my husband's income. If you look at my signature below, my chapter 13 payments are only $125/mo and he looks at that payment as a minor amount to keep our house. I really don't think it is smart for our financial future to keep it; I'm just not sure of the process to surrender it in our current economy when we are current on its payments.

Any comment will be greatly appreciated!

I wouldn't call your attorney and ask to be converted, I would make an appointment with him and insist on being converted. From what you described you are experiencing true hardship staying in the 13 plan.

Depending upon how much allowed rent is for your area you may need to tell your attorney that you will keep the house, but don't sign a reaffirmation. (The house payment % Heloc may be much more per month than allowed rent. Go over the numbers both ways.)

Please make an appointment for a face to face meeting with your attorney, and don't let him push you to stay in a 13 unless it makes sense to do so.

[SMinGA]

I agree w/ newbie2. Don't go to your attorney with the mindset of needing his permission. If the house is more than you need/want/can afford, then letting it go sounds like a wise choice. The idea is to come out of bankruptcy on sound financial footing. With a high mortgage payment and reduced income, even if you were at the end of your plan it does not sound like things would be sound for you.

Start 'window shopping' for a rental house. Get an idea of what it will save by renting and letting the mortgage go. (Factor in tax benefits of mortgage taxes, interest.) Keep in mind you will also need to adjust withholding - if you owed federal for 2009 and lose the tax benefits of homeownership then you may need to have more withheld.

[justbroke]

As a "convertor" (or a "converted") it appears you are a good candidate for this. I would do as instructed above. Get an appointment with your attorney to sit down and convert your case. Make sure you understand the costs of conversion.

[Billssuck]

Thank you for all the great advice...it all makes sense! For newbie2, I got the phone conference by actually going into the office in person. He has wall-to-wall clients right now and his staff are trying to guard him away from things that take time away from those clients needing to be filed. So...I am on the back burner.

Unfortunately today, I had to take my 2 1/2 year old son to the Emergency Room during the time of our phone conference. I called first and rescheduled it on April 8th. In the meantime, I am taking in a copy of all of our pay stubs so he can review them. I have tried everything to get a face-to-face appointment but it hasn't worked. I guess I could let them know I may have to report him to higher authority if I can not be seen when I drop off my stubs on Thursday.

I really appreciate the tax advice, to discuss cost of a conversion, and to look at all angles of renting vs. % with HELOC. These types of suggestions are what helps us all on the forum.

One question, if we're converting to a ch7 and surrendering the house, when do I quit making my mortgage payments? I know this is one of many questions to ask my attorney but I wanted to see what others have done in their completed conversions.

Thanks again!

[car67]

If you know your wanting to ditch the house and go to rental then stop paying the mortgage as it doesnt make sense.. But I dont think you can do anything till the court either approves the conversion to a 7 from the 13 or dismisses the 13 then you can get another attorney to file a 7 if the current one wont walk down the trail with ya. Remember the attorney will charge all new feew for the 7 and thats not payable via payments.. Your Chapt 13 is only $125 a month I think you got a really good deal!