A ton of Questions about Chapter 13

[kittywalt]

Currently we are thinking about filing Chapter 13 - I would rather file Chapter 7, but being behind on our mortgage and wanting to keep the house, that isn't possible...or least that is what I have read.

So my questions are:

1) we are just over 5k behind on our mortgage but current on our car (which we want to keep). If we are able to work out a payment plan with the mortgage company for the back mortgage payments to be spread over the next 10 months or so, could we file Chapter 7 and not risk losing the house?

2) If we do end up filing chapter 13, we have $120 in disposable income at the end of the month. Which would pay off the back mortgage payments for the next 60 months and leave approx $14 per month to other creditors - is it possible to even file a chapter 13 with such a small amount of disposable income?

3) We have a 2nd mortgage of approx $23k, with payments of $86 per month, but am confused about how to strip the 2nd. Zillow puts our house at $156k, but the statement from the county shows $126k. We currently owe $146k. Do we have to get an appraisal to be able to see if we are even able to get the 2nd stripped?

Sorry so many questions....we are trying to get a modification with our mortgage company, but can't wait any longer as we have a summons that we have to respond to by next week and can't afford to be garnished. Thank you for any insight you might be able to provide.

[momofthree]

1) we are just over 5k behind on our mortgage but current on our car (which we want to keep). If we are able to work out a payment plan with the mortgage company for the back mortgage payments to be spread over the next 10 months or so, could we file Chapter 7 and not risk losing the house?

I don't know much about ch.7 but was under the impression that you had to already be current when you filed. Maybe someone else can chime in on this...

2) If we do end up filing chapter 13, we have $120 in disposable income at the end of the month. Which would pay off the back mortgage payments for the next 60 months and leave approx $14 per month to other creditors - is it possible to even file a chapter 13 with such a small amount of disposable income?

$120 might not cover it all. You'd need to pay not only the arrears, but also the trustee fees and attorney fees as a bare minimum, which would probably be closer to $140-ish. Regardless of your DMI, if you want to file ch.13 and you have a minimum that you have to pay in, then you'd just have to find room in your budget for it. We were in that situation, but we actually had a negative DMI. On paper, we eliminated our home maintenance expense and decreased both groceries and transportation expenses in order to fund our plan.

3) We have a 2nd mortgage of approx $23k, with payments of $86 per month, but am confused about how to strip the 2nd. Zillow puts our house at $156k, but the statement from the county shows $126k. We currently owe $146k. Do we have to get an appraisal to be able to see if we are even able to get the 2nd stripped?

Zillow is usually inaccurate. I'm not sure about assessed values, but I know around here, assessed value isn't even close to true value. You should have a real estate agent run a comparative market analysis for you to see where you stand. Most will do this free of charge. I'm guessing you'd probably be able to strip your 2nd...

Good luck and keep us posted on your progress!

Sorry so many questions....we are trying to get a modification with our mortgage company, but can't wait any longer as we have a summons that we have to respond to by next week and can't afford to be garnished. Thank you for any insight you might be able to provide.[/QUOTE]

[kittywalt]

Momofthree -

thank you for your quick reply and information. We actually have a negative DMI also, when we use the means calculator, but when you look at our budget we have th $100-120 extra. I will take into consideration that we need to work the budget to make a plan that the courts will approve. I just wasn't sure that if all we have is what is being paid for the back mortgage and the fees for the trustee, and nothing to the credit card companies if the plan would fly with the court. I did request a CMA for the house and should have it tomorrow before I go to meet with the lawyer. BK is super scary and confusing....at least from this side of it. Also, do our payments for the house and car get made through the trustee for the life of the plan? That was a little confusing to me.

[momofthree]

Momofthree -

thank you for your quick reply and information. We actually have a negative DMI also, when we use the means calculator, but when you look at our budget we have th $100-120 extra. I will take into consideration that we need to work the budget to make a plan that the courts will approve. I just wasn't sure that if all we have is what is being paid for the back mortgage and the fees for the trustee, and nothing to the credit card companies if the plan would fly with the court. I did request a CMA for the house and should have it tomorrow before I go to meet with the lawyer. BK is super scary and confusing....at least from this side of it. Also, do our payments for the house and car get made through the trustee for the life of the plan? That was a little confusing to me.

We were negative over $1000 on the means test (actually I didn't even have to take it due to being under median, but filled it out just for curiosity's sake), and our I&J was negative around $50/mo. We had to find an extra $140/mo or so to fund our plan. It varies by district whether or not you have to include your secured debt in the plan. If you do, your trustee's fee will increase...

[seanjpatel]

Kittywalt,

IMHO I would let the house go. I know it is a super hard decision, but you have to take the emotion out of it. I would file Chapt 7 if you can and just walk away from it, much like the big corporations did with their bad investments. On the other hand, If you want to keep your house just include everything in your chapter 13 plan, including what you are behind on the mortgage. The Car payments can be included in your plan as well as your mortgage. It all depends on how your attorney structures it. Once you file Chapter 13 everything stops so to speak. All your debt is included in your plan.

[mrskal]

As far as I know you dont have to be current, I hope not at least, that is what I am doing. My lawyer know we are behind big time. I would think he would have said something. I do not want to keep my house. If you want to keep your house, you will need the modification.

[kittywalt]

So I finally talked to my contact at GMAC - she's been super busy with hearings, but told me the loan modification was going to be done next week, she has to put the numbers together, but it is more worthwhile for us to wait a week for the documents, fed ex them back so the account can be immediately updated and then file chapter 7 instead of chapter 13. We are only looking to file chapter 13 if we can't get a modification and/or our second loan can be striped.

So I am still meeting with the lawyer this afternoon. More importantly we have a summons that we have to answer by next week, so in order to buy more time preventing a judgment and garnishment, I will have to pay the 155 for the response.

[SMinGA]

Some thoughts... If you are working on a loan modification, you would not want to file any bankruptcy until it is done. As in, signed docs from the lender back in your possession. Otherwise, when you file the automatic stay prevents the mortgage company from completing your mod - without first lifting the stay to be able to work with you again. And that time delay could put you back to starting over again.

As to a ch. 13 plan. In some districts you are able to pay your vehicle loan in your plan. If you have less time remaining on auto loan than in the plan, this can help 'find' money to fund your plan. Say you're paying $300/mo on a car for 3 more years. You would be able to do a plan for $400-420 (based on your figure of $100-120/mo) and that would pay off the car as well as your arrears. The car loan would get some interest in the plan, but its limited to something like 3-6% by the bankruptcy court.

Also if you are able to strip your 2nd, you would no longer be making a 2nd mortgage payment so there would be $86 to add to your plan payment.

It does not hurt though to consider all options - even the scenario of giving up the house. Compared to what your first mortgage payment is at now, could you rent elsewhere for less?

[SMinGA]

Ouch on the $155 - but try looking at it as an investment? Buys you time to gather info to make a good decision on how to handle the bankruptcy.

Depending on how far out you can push the potential judgment, keep this in mind: if you get the loan mod they will probably add the interest from the missed mortgage payments onto your principal and bring the loan current w/ a reduced interest rate. Which will lower your payments. Double edged sword... Might give you DMI and prevent you from ch. 7, but also might increase your principal enough for a lien strip (if you are close or just shy of being underwater on the 1st now) on the 2nd.

So I am still meeting with the lawyer this afternoon. More importantly we have a summons that we have to answer by next week, so in order to buy more time preventing a judgment and garnishment, I will have to pay the 155 for the response.

[kittywalt]

SMinGA,

Thanks for the reply. We can't rent for less than what we are paying - we pay $1032 and a house one street over is renting for $1075 - besides that the chances of our being able to purchase another house is pretty slim - My Husband bought this house at the the height of the market with no money down - probably not going to be possible in the future. And our expenses vs. income really doesn't leave any room for saving. So we really want to keep the house.

[SMinGA]

That makes sense - I am in a similar situation. But at least you have reviewed that, and not just relying on emotional reasons for staying in the house.

I was able to get a mod by the way, thru Bank of America (formerly Countrywide) and my timeline was quick compared to most. Mine was inhouse - not the federal program - and started mid April. I should receive my copies of the docs back from BofA any day now. Loan is now current, payment reduced slightly. My principal did not go up by the full amount of the missed payments - just the interest. (Which when I thought about it, made sense because the 'principal' part was already part of the principal.) They did not alter my escrow account as part of the mod, and since I had not paid much on my mortgage (only made 3 payments since taxes, insurance were paid last fall) my escrow balance was bleak. Just made a payment to fix that balance instead of paying a higher than usual escrow payment for the next year.

[kittywalt]

Update:

I spoke with my contact today at GMAC and our in-house loan modification has been approved and we should have the documents by the end of the week. Our payment went down $200 a month (we had 5 months of back payments that were rolled into the loan, extended the term and brought the interest rate down 1%). I can't even begin to tell you how happy I am. She was wonderful - it's been a rather short process (only about 5 months) yet it seemed like years, but seriously when she told me it was done I started to cry. We will fed ex the docs back to her and she said it will take her a week to a week 1/2 to get the file updated then we can file our chapter 7. She has completely taken us under her wing to get this done.

Thank you everyone for helping me with all of my questions! Chapter 7 is the way we are going and we're almost there!!!!

[azballer]

Update:

I spoke with my contact today at GMAC and our in-house loan modification has been approved and we should have the documents by the end of the week. Our payment went down $200 a month (we had 5 months of back payments that were rolled into the loan, extended the term and brought the interest rate down 1%). I can't even begin to tell you how happy I am. She was wonderful - it's been a rather short process (only about 5 months) yet it seemed like years, but seriously when she told me it was done I started to cry. We will fed ex the docs back to her and she said it will take her a week to a week 1/2 to get the file updated then we can file our chapter 7. She has completely taken us under her wing to get this done.

Thank you everyone for helping me with all of my questions! Chapter 7 is the way we are going and we're almost there!!!!

I am also waiting on a GMAC modification to file Ch 7. Was this "contact" someone special or just the person assigned to your modification? I have been waiting for almost a month now for the in-house response. If it is someone you could share with me, would you please send me a PM with her contact info? Thanks!