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Please help; Lawsuit, foreclosure, IRS, RV, credit cards - very bad

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  • Please help; Lawsuit, foreclosure, IRS, RV, credit cards - very bad


    This is my first post to this site. My situation is very dire. Any feedback to this thread is most appreciated.

    Here are the facts:
    1) Laid off from job in Phoenix, AZ, in late 2008.
    2) Home located in Phoenix, AZ, (primary residence, actually, only one) foreclosed in early 2009. Home was purchased Nov, 2006.
    2a) First lien = $416,000 (5/1 ARM)
    2b) Second lien = $178,000 (don't recall the structure of the loan)
    2b.1) This loan was the result of an immediate refi extracting out 97,000 of equity.
    2b.2) Cash out was intended to payoff debt.
    2c) Home purchase price was for $520,000.
    2d) Initial home value was $580,000 (later found out it was actually $631,000)
    2e) Was looking forward to refinancing the entire loan structure within six months of moving in to lock the rate at about 5.5% for 30 years fixed. This never happened because the house started to rapidly lose even more value.
    2f) Of the cash out very little was left and over the 2009 time period the remainder was used to float the household while my wife had very serious medical issues unexpectedly arise. We also incurred approximately $45,000 in credit card debt.
    2g) House sold for about $306,000 at auction in early 2009.
    3) Our family moved to Seattle, WA in mid 2008, in order for me to find work.
    4) Second lien holder sued us for entire $178,000.
    4a) We have had an attorney fighting the case for more than a year now.
    4b) File for dismissal of lawsuit since it was claimed by lender that none of the funds was purchase money. We have proven about $80,000+ was indeed purchase money. Deposition was last activity as of 3 months ago. Not sure of current state of lawsuit.
    5) We have not filed our taxes since 2007. We have now hired tax lawyer to find out what the damage is that we are facing. Until recently we had simply given up as we watched 10 years of our financial life vaporize. We may owe as much as $20,000-$30,000. Attorney will get back to us in 7-10 business days.
    6) RV was purchased in Sept 2007 for approximately $96,000 with $10,000 down and a trade-in. Financed at 6.75% for 20 years (yeah, I know, stupid) for $84,000. We are currently two months behind.
    7) Minivan (2005) my wife drives has remaining balance of about $18,000. Vehicle is very beat up on the outside. Value probably is about $10,000 tops.
    8) Borrowed $11,700 from mother-in-law in late 2008. She used the HELOC on her home to provide the cash. She has since foreclosed on her house. She no money whatsoever now. I have not been paying any money since her home foreclosed (around Jan 2010).
    9) Student loans are delinquent by 240 days for a total amount of $105,000+. My wife has since gone back to school and will graduate in two years. This will tack on another $40,000. Current consolidated payment is about $650/month with fees bringing it to almost $700/month.
    10) Only titled asset we own is a scooter worth about $1,000.
    11) Combined gross income is about $150,000.

    That pretty much sums up the picture.

    We have worked extremely hard to make things right, but something always surfaces and we are never able to get ahead. We are pretty frugal with our lifestyle, but our expenses consistently clock in at about $9,000/month. BTW - Our rent is dirt cheap for the Seattle area at a little less than $1600/month.

    I have done an initial visit here with bankruptcy attorney. She wants $1,800 up front just to start a chapter 13 filing. I should also note that prior to leaving Phoenix, AZ, we did hire an attorney who going to complete a chapter 7 filing. He dragged his feet once we were moved to Seattle, WA, and refused to cooperate and return our phone calls most of the time. (we are very, very low key people)

    Over the past two years, we have spent more than $36,000 on the motor home. At this time, we are simply going to cry 'uncle' and let it go. The big question is what is the best course of action?

    1) Bring the RV payments up to date and then file chapter 13.
    2) Call the bank and tell them to pick it up and then file chapter 13 (sometime in the near future when we find out the results of the lawsuit and IRS back taxes).
    3) Bring the RV payments sort of up to date, consign the RV with a RV dealer to sell it.
    4) Don't file chapter 13 and simply pay the credit cards off at 50% settlement. This option seems possible as long as the second lien holder drops the lawsuit and also does not file a new one against us for the non-purchase money. Another assumption is either of the lien holders do not report the forgiveness of the debt to the IRS as income (we should find out in the next 7-10 days from our tax attorney).
    5) Any other possible solutions???

    a) If we do file chapter 13, when should we do it and when should we not do it?
    b) Based on this situation would we be forced to complete a full 60 month chapter 13 or would the time frame be reduced down to the lower end of 36 months?
    c) If we file chapter 13, and the second lien holder apply a new lawsuit, can that be included?
    d) What if we don't do a chapter 13 at all and simply try to negotiate with bank for the RV and the credit cards? What type of financing might be available if any?
    e) Should we also get rid of the minivan? If so, how would we purchase an alternative vehicle with things so messed up?

    I realize this is a ton of information. But it is all on the table. Please, provide any insight you may have. I am at a complete loss for what the best solution may be.


  • #2
    It is a ton of information, and I got through it all the best I can. My 2 cents? File for Chapter 13. Chapter 13 is a re-organization plan. Your situation definitely calls for everything to be organized right now. I wouldn't even attempt to try and negotiate with the bank for the RV, the credit card companies, the IRS and your 2nd lien holder. That's way too much going on and I don't know how you have been able to wrap your head around it all. I give you credit, I wouldn't have been able emotionally to have waited to file with all that you have going on.

    Also, your income is over the median, so it will be a 60 month plan.
    Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
    I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.


    • #3
      1. Your unsecured debt may actually be too high to file a chapter 13, but assuming that you can.
      (student loans $105k, deficiency balance $178k, credit cards $45k, RV repo deficiency ??? = possibly more than the $360,475 maximum)

      2. You will automatically be in a 60-month plan as you are over the median income. When you're over the median, the only way you get a term shorter than 60 months is if you pay back 100% of your debt.

      3. You will not be allowed to keep the RV, so you may as well stop paying it now. Any money used to "catch up" your loan will be money wasted.

      4. You can include the deficiency balance from your mortgage(s) whether they pursue any more legal action or not. They will automatically count towards your unsecured debt.

      5. As long as you purchased your minivan at least 2.5 years ago (910 days), then you can "cram down" the balanced owed to the current market value. The remaining $8k would become unsecured debt and paid at the same rate as your other unsecured creditors.

      6. Student loans will go into forbearance during your ch.13 plan, so you will not have that payment, but your interest will still continue to accrue.

      7. If you file ch.13, you have to get permission from the trustee to incur more debt--this includes student loans, so you may have an issue with your wife's schooling. Consult an attorney.
      Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
      0% payback to unsecured creditors, 56 payments down, 4 to go....


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