My Story - Is It Unique?

[jollyrj]

Sort of long but I'm hoping there is someone that can relate maybe a little to what I'm dealing with.

Today - facing judgement .. wanting to settle but maybe forced to file Chapter 13.

7 months ago:

Perfect credit, no problems paying bills.

Married to prescription drug abuser/addict..EXTREMELY dangerous situation.

Made choice to divorce and to leave the home with my son for safety factors. Chose to rent an apartment and walk away from the house. Chose my son and my safety over credit.

Ex was claiming to be working towards "saving the house" and the 5th wheel trailer we owned.

Ex overdosed and died in our house..in a very gruesome way. I loved this man and only left because I had no choice for myself or my child.

Had service for him on a Sunday... was served papers by our 2nd Mortgage that was in both my deceased husband's name and mine on that following Monday. I was given NO time to call our creditors (all of three - 1st Mortgage, HELOC/2nd, and trailer). Found out he did draw from his 401K but didn't use the money to save the house.

Met with atty on Tuesday to discuss my options. I want to settle at 50% with the HELOC/2nd creditor as I can't afford to pay 100% of everything when the loans were initially extended based on TWO incomes. Trailer creditor working with me. Main mortgage.. going into forclosure. Deficiency will be covered by the mortgage insurance. The HELOC creditors just doesn't care.. they are not responding to our settlement offer and time is running out on the summons.

Bottom line, I'm shocked. They would rather me file Chapter 13 & wait 5 yrs to possibly receive 60-70% (per atty) of their money, costing the tax payers rather than settling today at 50% (I am drawing from my 401K).

What would their logic be? Or is it that my logic is off?

Thanks for anything anyone can offer .. Rachel

[bling32]

I don't much but make sure that you respond to summons and/or show up to court so that they don't get a default judgement.

Best Wishes

[momofthree]

What is your house worth and how much do you owe on each loan? Are you hoping to strip the 2nd lien?

[jollyrj]

Thank you for your replies...

Replying to the summons.. my atty said that he will have it ready to go (answer) in time. I emailed him today to see if there is anything I need to do since we are about 10 days away from that date.

The house is worth probably 275K and I owe about 277K on the first. I thought about reclaiming the house but the issue I have with that is strictly on an emotional one.. because he died in the bedroom and not in a good way. I couldn't go back or even consider bringing my kiddo back there. I thought about trying to sell it but what I have been told is that because of the death and the circumstances, there is a lot of work to be done to get it ready to sell. Replacing subflooring, carpet, paint, etc. I don't have that kind of money. So, my only choice really is letting them foreclose. We had mortgage insurance though so that should deal with the deficiency.

2nd is aprox 40K. Stripping the 2nd.. not sure what that means exactly but my understanding is that the lien holder (2nd) gave up their stake (lien) in the house and decided to go after us (me now) on the personal guarantee section of our contract.

Thanks

[keepsmiling]

Just wanted to express my sympathies on your loss. How terribly tragic.
The rest of your story is probably not that unique except for wanting to settle on a house you are giving up....the experts here will need more info such as if you have other debt, what your income is, if there are life insurance proceeds due, etc. I think that 50% seems very high for an unsecured debt.... which is what your Heloc is....
good luck, keep posting, lots of help forthcoming I am sure!

[keepsmiling]

When you say you had mortgage insurance--- do you mean PMI? Or something more specialized? PMI does not cover your deficiency.

[walkthaplank]

That is horrible, I am so sorry for you and your son, nobody should have to deal with that.

When you talked to your lawyer, have you discussed the possibility of filing CH13? It doesn't look like you are trying to save any assets, it seems like you want to walk away from the house. If you are able to file CH7 and walk away from the house, you can probably work something out with the creditor for your 5th wheel, you might even be in a better position to negotiate with the creditor after a CH7 discharge. If you can't qualify for a CH7, at least you can fall back on CH13, not the best option, but it will get the job done.

What I wouldn't do now or at any other point is pull money out of your 401k. Leave that alone. You have BK to deal with debts, what you don't have is a program to deal with not having enough money once you do retire.

Good luck

[SweetGeorgia]

I'm so sorry that you've had to go through all of that. Glad that you and your son are safe; it seems you did the right thing at the right time.

I can't imagine ever wanting to go back to that house, and if you can't live there you have a VERY understandable reason. If there's a way for your attorney to buy a little time for you...it just seems like a bad idea to make such decisions so soon after a death. Good luck to you, we're thinking of you.

[Pandora]

so sorry to hear all you've endured thus far - my condolences to you.

As far as the house - since you've stated you do not want the house (never reaffirm....) - unless your income dictates filing a Ch. 13 - why not just go with a CH. 7 and let the bank take the house? Any deficiencies will be included in your BK filing.

[jollyrj]

Thank you so much for all of your input.

PMI - yes, I believe that's it. That doesn't sound good for me.. I thought it covered deficiency but now I'm thinking only default? Which does nothing for me in the case of non recourse anyway. Yikes.. I guess this is another one to talk to my atty in depth about. If I do choose Chpt 13 and the house is still not sold or "auctioned" by the time all the claims have to be in, would that mean they could go after me once the discharge is completed in 5 plus years? Ugh.. more to consider.

I do not qualify for a Chapter 7 because of my income... I'm slightly over median.

Income:62K
Secured Debt: House but foreclosing but surrendering...
Unsecured Debt:

17K - trailer (which by the way is deficiency amount because husband let it get re-poed) - no pymts since July 2010,

40K - heloc - no pymts since July 2010

3900. - CC - current, only in my name

3800. - CC - current, only in my name

TOTAL: 64,700.00

Chapter 13 for me if it comes down to that.. although not trying to save anything, no real assets anymore. My car is 9 years old and will eventually need to be replaced as well. My atty told me to draw from my 401K so if the heloc creditor agreed to settle, the money would be readily available. It's not a loan.. that's another thing I worry about is retirement.. I'm 41. Just feel stuck.

My atty said he could buy me a little time but only 10 more days.. yes, it's a lot to deal with in such a short period of time. I'm not thinking clearly how it is and all of a sudden I'm facing MORE huge life changing decisions ... trying to figure out whats best for my son and I so that we can move forward. I feel so "stuck" and feel like everything is out of control.

Thanks again..

[jollyrj]

Oh and Life Insurance.. is in my name but its very small (5K) and he racked up thousands of dollars in debt in his name only over the past 7 months. I'm talking a crazy amount. He was buying with credit cards and selling items on EBAY and Craigslist for cash. I found this out once he passed. Thankful I'm not affected by any of that but they (his creditors) will probably want the life insurance benefit?

Note.. he wasn't always an abuser.. think he was always an addict but the man who died in our house isn't the man I knew for so many years. I just feel still somewhat protective over him in spite of the situation I'm in, due to his abuse.

[enginegirl]

gosh my heart goes out to you..... I wish you the best of luck ..... it WILL get better.....
sending hugs to you....

[Pandora]

jolly

Being over on income doesnt mean you cannot file CH. 7; means test is only part of the equation. If you're negative DMI, you can still file CH. 7 vs. Ch. 13

ETA:

My atty told me to draw from my 401K so if the heloc creditor agreed to settle, the money would be readily available. It's not a loan.. that's another thing I worry about is retirement.. I'm 41. Just feel stuck.

I'd consult with a few attorney's before deciding on this one. You should NOT pull from your 401K to settle a 2nd mortgage on a home you're planning on letting foreclose.

[NoMoreCards]

I just wanted to add my condolences for all you have been through. If your husband was your son's father, you might look into social security options.

Please talk to a few BK attorneys and explore your options. I was well over the income limit for a chapter 7, but had the expenses to allow me to still file and receive a discharge in a 7.

My heart goes out to you. As a mother you did the best thing you could, to protect your son and get him out of that environment. I pray you find the strength to get through this, and move on knowing that you couldn't "fix" the addiction regardless how much you wanted to.

[IamOld]

Wow - I don't know what to say......I hope all turns out...ok........


On the business side, Oregon's median is around 55K - as other wiser posters have said, shop around a few bnkpcy attys, because with one child how in the world don't you have enough expenses to "get rid of" about 10K of "disposable" income????????