I'm about to lose it. What should I do? Please help!!

[STEPH1079]

Not sure if anyone remembers, but awhile back I posted how our interest rate on our mortgage will be going up in September. I received a lot of advice (thank you) and looked into a loan modification that would lock in our interest rate (8.75%) now until our BK is over in 2 years.
Long story short, b/c we are in a BK, our mortgage company will not do a loan modification. Based on the 6 month LIBOR rate, our new interest rate will be about 11.75%, adjusting every 6 months thereafter. The cap is 14.75%.
I don't know what to do. Our plan is 100%. I talked to our attorney and he said that if we re-fi before our plan is up, payback is 100%. We just completed our first year in the ch.13 and have two more to go. That means our mortgage will adjust 4 more times before the BK is over.
What should we do? We have a lot of equity in our home. If we re-fi'd, would the Trustee take it all? Say we have 50k in equity, and we owe $30k in BK, would he take the entire 50k?
Not only that, but our house assessment doubled, so that means our taxes will rise too. I feel sick.
Any thoughts or advice?

[STEPH1079]

Here are the numbers:
We owe $125,000 on the mortgage
House would appraise for at least $210,000
We owe $30,000 in BK

????

[anonymuse]

I don't think the trustee could take the equity protected by the homestead exemption. Are you able to file for a modification in your plan?

[Minnymouth]

If you have your house payment outside the Chapter 12 plan, you have a SITUATION............ your doomed if you do and doomed it you don't.......

This one you may have to "ride out" until the Chapter 13 is over..... may be your only option...

Way too much equity for the Trustee to go after, homestead exemption probably would't cover most of it..... thus making it fair game for the Trustee.

Grab the bull by the horn and ride with the tide.............. and hopefully the next 2 years will go by quickly...

[aa06a47]

That interest rate sucks, I wish I had something I could say other than ride it out. You might be able to do a plan modification with the trustee, as your payment goes up on your house, your payment to the trustee would go down, but the time would be extended.

[GettingThere]

Are y'all saying that if you refi before completing a 13, the trustee takes ALL of the equity? We're in a 13, only mortgage arrears and about $1,500 in medical bills are in our plan. We owe $172,000 on our house and it was appraised at $300,000. Would the trustee get all the equity if we refi'd?

Thanks,

[aa06a47]

You would have to get permission from the trustee to refi it. As long as you only refinanced it for the same amount of money, the trustee shouldn't get anything extra. However, he will probably raise your payment an amount equal to the money your saving by refinancing.

If you sell you house, that is a different thing. You will probably have problems doing a refi in bk at least at a good interest rate, but then again, the rate your paying now is criminal.

[Anj]

I don't think so - you pay your debt - 100% - if you have "leftover", you get to keep it. A 13 (if you are paying 100%) is not forgiving any of your debt - you are paying all of it back, just under the Trustee's protection and in installements. The Trustee can NOT take - or at least keep - more than you owe if you pay back 100%. So I am gonna say - you keep whatever is left after the 13 is satisfied....


Anyway - If I were you (and I'm not) - I would refi in a heartbeat!!!!!
We are too close for comfort on the equity and debt level... so we can't just yet.

GL!!!!!

[aa06a47]

I don't think so - you pay your debt - 100% - if you have "leftover", you get to keep it. A 13 (if you are paying 100%) is not forgiving any of your debt - you are paying all of it back, just under the Trustee's protection and in installements. The Trustee can NOT take - or at least keep - more than you owe if you pay back 100%. So I am gonna say - you keep whatever is left after the 13 is satisfied....


Anyway - If I were you (and I'm not) - I would refi in a heartbeat!!!!!
We are too close for comfort on the equity and debt level... so we can't just yet.

GL!!!!!

OK...i missed the 100% payback....Anj is correct.... just not sure if the trustee can mess with the interest rate a little on the unsecured if you change the terms, so if you have some extra money, the trustee may dole some interest in the equation.

[SinkingFast]

13inOR did that. They were in a 100% payback plan so they refi'd their house to pay off their 13 plan.

As others suggested, contact your attny or the Trustee first about your plans to refi.

One thing you need to know is you may have to continue to make monthly payments for 2-3 months or so after you make that one lump sum payment. Until the Trustee's office catches up and "officially" tells you to stop. Sometimes, notifying the Trustee in advance helps them order that you cease the payments quicker. Then the Trustee will do a Final Audit of who got paid how much. The excess will be refunded to you and you'll be discharged and closed.

You might search for posts by 13inOR and read how it all happened.

[STEPH1079]

I talked with my husband over the weekend, and he doesn't want to re-finance, or try to ammend our plan. I really don't want to do an ammendment either, only two more years to go! I'd hate to extend it longer.
I don't even know if re-financing would be worth it. Our credit scores suck (for obvious reasons) so I'm not sure we could get that much better of an interest rate.
I guess the best thing we can do is ride it out, like some of you suggested. It makes me sick to my stomach to think about how much more we will pay, but there is a light at the end of the tunnel, it will just take two years to get there.

[SinkingFast]

I think 13inOR did this for her husband,..........

Make yourself a construction paper, paper chain of links. One link for each month and string up in your bedroom. Then as each month passes, you get to take off a link. That way you can see your progress and KNOW the end is coming!

[anonymuse]

I think 13inOR did this for her husband,..........

Make yourself a construction paper, paper chain of links. One link for each month and string up in your bedroom. Then as each month passes, you get to take off a link. That way you can see your progress and KNOW the end is coming!

Kewl Idea!

[13inOR]

It is true, the trustee cant and wont take any more than your total payoff if you are in a 100% plan. Part of the approval process includes payoff amount from the trustee. Ours allowed us to get cash over and above what we owed them and everything, to get a new car. I think you should at least look at it as a possibility, do you know that the lender we went through went more by our payment history on your chapter 13 than anything? So if you have been paying that well, you might very well get a decent rate of no more than 8 or so. It cant hurt to check into it.... there are many lenders that advertise to people in BK to refinance their 13 so it can be done.

It worked great for us but of course everyone is different. SF was right about the paper chain: while we were in ours my husband needed something to look at to see our progress, and as odd and simple as it sounds, it did help!

[STEPH1079]

13inOr, who did you go through?
I was afraid that the Trustee would take all of our equity. I am still not completely sure how re-financing works.
We bought the house for 140k, and made a 10% down payment (we had to).
Say we get approval to re-fi, and get locked in at 8%. How can we get cash out for ourselves? Can we re-finance the loan at a larger amount? We owe around 125k now, is it possible to move it up to say, 140k?
But now that I think about it, we'd still be paying a lot of $$, due to a higher interest rate.
Our ch13 is up June of 08. Should we re-fi then?