Filing Chapter 13 soon - and I dont' want my house....

[boomerkae]

My husband and I have been planning on filing ch 13; stopped paying credit cards months ago. We are current on the mortgage ($278K), approaching 2 months on the equity line ($109K), house is worth about $250 based on BPO. We were over median income so the ch7 was out; and we wanted originally to secure our home and lose the 2equity loan.

We currently have a filing date set for Dec 29.

But, for multiple reasons, including some repairs that are going to cost way more than we can afford, we don't want our house. Our credit is shot - so we know we won't be able to get a home loan. We are looking at moving in with my dad and paying a decent, but affordable rent; having my husband quit his job and take care of our two kids. when I worked up my income v expenses, we were -$400 (before leaving the house and taking the kids out of daycare).

So- my question (and I've reached out to my lawyer and am waiting for a reply)

How do we get rid of the house? Do we stop making the payments? Can it be included in the ch 13? Or, do we file first, then stop making the payments and let it foreclose? How does the foreclosure effect things?

I've been reading a lot - and will continue. A lot of folks seem really helpful around here so I'm hoping for some helpful answers!

Thanks!

[IAmNewToThis]

boomerkae - yes there are very helpful people on this site - they helped me tremendously. I suspect someone will see your question and answer it today, be patient. Though I appear to be in a similar boat to yours, I want to keep my home, so at no time did I ever wonder or ask what would happen if I did not wish to keep the home. With the little knowledge I have I will not be able to provide you an answer. Perhaps the answer lies in selling the home for a short sale and then filing, that way when you eventually get discharged you will not have the debt you incur from the short sale. Once again, do not rely on anything I stated here, I’m just trying to start the process of answering your question. Two weeks ago when I registered and formed my question I found that once the first person replied other replies flooded in - Good Luck.


Additional Thoughts
What I do believe is you should not pay on your mortgage at this point even though you are filing Chapter 13. Also, it seems to me that there is no law stating you have to file Chapter 13 and keep your home. Chapter 13 is there for those who do not qualify for Chapter 7 because they make too much money (income is greater than the median). Once again, I’m sure someone will be along this lazy Sunday afternoon to provide you with a more thorough answer

[october99]

I have read here of including a house in a Ch 13. I believe if there is a deficiency after the foreclosure sale then it would be included in your creditors/repayment plan. A search of the forum should result in many scenarios and advice.

On the other hand, I'm wondering if you would qualify for a Chapter 7 with your income alone? If your DH is going to quit working, why not stop paying mortgage, stay as long as you can living on one income until you qualify for the Ch 7 and discharge it all? You would use your areas rent rate for the means test and budget. Or if you can't wait it out you could file the 13 with plans to convert once the income drops.

[drowning123]

boomerkae - what was your DMI (disposable monthly income)? It doesn't necessarily mean you are disqualified from a Chapter 7 just because you're over median. I would take october's advice. Stop paying everything now or once your husband stops working. Try to keep spending your money on household expenses so you won't have too much in your bank account when you go to file 6 months later for a Chapter, which I think you'll be qualified. Is it just you and your husband in your household?

[boomerkae]

thanks for te additional questions. Here's more info.

We wanted to file BK about 4 months ago. It was me, my husband and an almost 2 year old. We waited until after Sept, when my daughter was born. Then we'd have a family of four, and we knew our expenses would increase - daycare, formula, diapers, and hosptial bills. Under advice of the attorney, we waited until I went back to work to get things going, with STD, I'd show some decrease in annual income.

We were over the means on income. I've been told salary/income is based on 6 months, so we'd have to let hubby quit for 6 months first to use just my salary. Right now, from what I calculate (with us both working) we are -$400 each month to cover our expenses (which does include entertaininment, charity, new clothing and such).

We thought a ch 7 wouldn't be an option as it wouldn't strip the home equity loan.

I suppose we could wait 6 more months - but we really just want it all behind us ASAP.

[october99]

The Ch 7 would discharge the home equity loan as well as the mortgage. The advice the attorney gave you makes sense if you want to keep the house since the equity line would essentially be treated like a 2nd mortgage. I would sit down and carefully run the numbers to see how long without your DH's income it would take you to easily qualify for the Ch 7. With your STD months combined with the months of only your income at what point does the average tip the scales?

I completely understand wanting it all over with. I last paid CC in July and mortgage in Aug. DH became unemployed in early Sept. We are letting the income tick down until January (at the earliest). We still won't be under median, but will easily pass the means test with large -dmi and on schedule J as well. I charted our monthly income and the 6 month average for each month and plugged it into the means test. For us it would have been nice to have it all filed and done in the last couple months, but it will be easier to qualify and fly under the radar filing next month. Honestly I've become quite thick skinned about it all since I have a plan and sticking to it. The only thing that concerns me is if or when I get sued or evicted, which surely is looming.

Congrats on the new baby girl. A baby at Christmas is so sweet and special.

[drowning123]

boomer - Chapter 7 gets rid of everything. Just hang in there for the Chapter 7. I had a first and a home equity loan. Chapter 7 erases all your debt. Do you own a car outright or are you making car payments?

[boomerkae]

boomer - Chapter 7 gets rid of everything. Just hang in there for the Chapter 7. I had a first and a home equity loan. Chapter 7 erases all your debt. Do you own a car outright or are you making car payments?

I own a couple jalopies, and JUST had to buy a new (used) car. We dumped $800 precious bucks into my car without the solving the problem so we had to buy a new one. So, yep. A payment.

So the advice that the home equity loan wouldn't be stripped is only if we wanted to keep the house? If I want to get rid of the house, it all can be erased with a 7? Really? Truly? Too good to be true...

[drowning123]

Yes, it's true. 7 is the way to go for you. You can erase the car as well. Stop paying everything and save that money. You can use some of that money to buy a nice used car. If you wish to keep your current car, maybe you can work something out with your lender to keep paying on the car even though you've included it in the bankruptcy. In order to do this, it's best to be current on your car payments. As for the house, stop paying. The bank will pay the taxes from my experience. Whatever you do, do not sign any re-affirmation agreements. This will make you still on the hook for to the lender and would defeat the whole purpose of a Chapter 7, which is to wipe the slate clean.

[Pandora]

My husband and I have been planning on filing ch 13; ....... We were over median income so the ch7 was out; and we wanted originally to secure our home and lose the 2equity loan.

But, for multiple reasons, including some repairs that are going to cost way more than we can afford, we don't want our house. Our credit is shot - so we know we won't be able to get a home loan. We are looking at moving in with my dad and paying a decent, but affordable rent; having my husband quit his job and take care of our two kids. when I worked up my income v expenses, we were -$400 (before leaving the house and taking the kids out of daycare).

The very first question you need to look at and go over with your attorney - is you state you are -$400 BEFORE leaving the house and daycare out, so you will not have a mortgage or daycare any longer. This means that your mortgage payment and the daycare expenses have to be added back IN, so where will that land you in the DMI category?

Before your husband quits his job, I'd definitely run it by your attorney first and foremost. Trustee's really do look at things like that as apparently alot of people quit working to qualify for a Ch. 7, then plan to start working again after discharge - unfortunately it doesnt work that way most of the time. Another thing to consider - how secure is your job? What happens if you suddenly lose your job due to ________ (insert whatever reason here) - and your husband quit his - how will you survive with 2 children? In today's economy, having a job is gold - keeping that job is getting exceedingly harder by the week it seems. My brother and his wife have each lost their jobs twice this year - with 2 different employers; they were each at their org. jobs for over 20 years when the notice was given that the doors would close. Nine months later, they each found another job - and just last week they were both told each company was closing its doors also.

Think long and hard from every angle before you decide... its not getting any easier out there thats for sure.

[boomerkae]

The very first question you need to look at and go over with your attorney - is you state you are -$400 BEFORE leaving the house and daycare out, so you will not have a mortgage or daycare any longer. This means that your mortgage payment and the daycare expenses have to be added back IN, so where will that land you in the DMI category?

Guess what I should have said is we are -400 including our mort and daycare. As for the median, we are about 10K over.

Before your husband quits his job, I'd definitely run it by your attorney first and foremost. Trustee's really do look at things like that as apparently alot of people quit working to qualify for a Ch. 7, then plan to start working again after discharge - unfortunately it doesnt work that way most of the time. Another thing to consider - how secure is your job? What happens if you suddenly lose your job due to ________ (insert whatever reason here) - and your husband quit his - how will you survive with 2 children? In today's economy, having a job is gold - keeping that job is getting exceedingly harder by the week it seems.

Think long and hard from every angle before you decide... its not getting any easier out there thats for sure.

OUr move is going to be too far for him to commute, so we know he is going to leave. I sent an email to the attorney, and it sounds like they are worried about us appearing fraudulent in quitting to file for 7. Not the case. He will still work - PT, and be home with our kids while I work. My commute will be tough (2.5 hour one way), but my work will allow me to telecommute 3 days per week. I am always worried about job security since I do contract work, but even if my contract ends, my company would keep me on for a while. We are going to be moving in with my dad and paying him rent.

[drowning123]

You know what? Your husband's reason for quitting his job sound reasonable to me. You're actually trying to cut costs by doing this. If you wait 6 months, it will seem like you tried everything to rectify your financial situtation but just couldn't get by. I say go for a chapter 7. Your bank statements will show that you've been struggling all along.

[boomerkae]

Your bank statements will show that you've been struggling all along.

Except for that big deposit for my short term disability.

I don't think we can wait six more months - we will likely be out of our house by then and in VA. If we live in VA for three months, our attorney can't file for us, and we can't file in our current state (MD).

[Pandora]

Except for that big deposit for my short term disability.

I don't think we can wait six more months - we will likely be out of our house by then and in VA. If we live in VA for three months, our attorney can't file for us, and we can't file in our current state (MD).

Even if you move here to VA, you wont be able to use VA's exemptions - you will still have to file using the state which you currently reside. VA requires you to be a resident for at least 2 years to file using their exemptions (and we cannot use Federal here in VA either).

If you are trying to file not using your husbands income - you may have to wait another 6 months as his income will count in the lookback. Check with your attorney as well because I'm not sure if Short Term Disability is excluded in the means test - I know Social Security Disability is.... however it is counted in the monthly income for payback purposes (at least where I am it is).

[drowning123]

Yes, boomer. Please don't be panicked and rush into anything. You really should wait the 6 months. You really don't need to worry about a roof over your head. You're moving into your Dad's house, correct? That should relieve some burden. Your best bet is to wait 6 months. Listen to us.