General Questions

[Ineedhelp2]

Hello.

I'm new to this site and probably should scan through some of the threads to see if this has been covered, but I'm anxious for some answers if someone would be kind enough to help while I search.

1) I have about $50,000 in unsecured debts. If my current income level is low, will I be able to have this balance adjusted? I have already been talking with debt negotiators who say they can cut this in half.

2) I have a 1st and 2nd mortgage and am behind about three payments. I'm working to get current, but will a bankruptcy stop the foreclosure process?

3) I have over $100,000 equity in my home. Under chapter 13, do I have to sell my home?

4) I am considering filing because of a serious setback, but I don't always want things to be this way. What happens if I turn things around in a year or two? Do I need to report an increase in income? What if I get an inheritence or if a deal comes through giving a windfall of money?

5) If I start a corporation, can the assets be exempt from being considered in the bankruptcy settlement?

[lrprn]

Welcome to forum, Ineedhelp2! My answers to your questions are below in red. This is a supportive site - not too many trolls and our mods get rid of them quickly. We've all been where you are right now - hang in there. Read the stickies and threads - there's a ton of great information to be found there - and keep posting questions. We're here for help and support any time.

1) I have about $50,000 in unsecured debts. If my current income level is low, will I be able to have this balance adjusted? I have already been talking with debt negotiators who say they can cut this in half.
Most of us here are suspicious of debt negotiators - they rarely come through on their promises and, frankly, there's nothing they do that you can't do yourself for free. Also keep in mind that if you or the debt negotiator does bring down your amount owed, then the amount saved from the original amount owed may be treated as income and you could be responsible for paying taxes on it. Not a great compromise imho. Bottom line is the chances of being ripped off by a shady debt management company is high - they very rarely ever help when finances are in such bad shape that bk is being considered.

2) I have a 1st and 2nd mortgage and am behind about three payments. I'm working to get current, but will a bankruptcy stop the foreclosure process? Yes, once bankruptcy is filed, it stops foreclosure and other debt collection actions immediately.

3) I have over $100,000 equity in my home. Under chapter 13, do I have to sell my home? No. Ch 13 preserves all assets you want to preserve (unless the asset has a large $ value). If you could answer a few questions, we could help more: What's the total amount of your debt? If you have that much equity in your home, why are you looking at bk rather than using the equity to pay off your debts? What state do you live in?

4) I am considering filing because of a serious setback (something within your control or not in your control?), but I don't always want things to be this way. What happens if I turn things around in a year or two? If you are in Ch 13, you are in the plan for the duration unless you can do an early buy-out, and that depends on your bk district and local bk court customs. Regardless, once you file, the bk stays on your credit reports (7 years from the date of filing for a successfully completed Ch 13, and 10 years for a Ch 7 or unsuccessfully completed Ch 13). Do I need to report an increase in income? This varies depending on your trustee and local bk customs. Most trustees want to know if there is an overall increase of 10% in income, but the trend lately is moving toward wanting to know about ANY increase in income. What if I get an inheritence or if a deal comes through giving a windfall of money? If the windfall comes through before your bk is discharged or within 180 days after discharge, the trustee will take the windfall for your creditors unless you are in a 100% payback Ch 13 plan. And if you know there's the possiblity for the windfall to come your way, you have to list it on your bk forms.

5) If I start a corporation, can the assets be exempt from being considered in the bankruptcy settlement? If you start the corporation for the purpose of hiding assets, this is fraud. Bk is serious business - you're dealing with the federal courts. A finding of fraud can not only ruin your financial life, it can result in much worse penalties (like fines and jail time). Don't go there.

If you haven't spoken with a bk lawyer yet, it's time. Most have free half-hour to hour consultations. Check www.lawyer.com for bk-specialty lawyers in your area. Make appointments with at least 3, take your last few years of tax forms and a list of ALL of your expenses and assets with you. You will learn a lot about what the best options are going to be for you. Good luck - keep us posted on what you decide to do, and again, welcome!

[bkbiker]

Hi,

Good advice from Irprn,

With that much equity in your home, I hope you live in a state with a high homestead exemption like Florida, that way your equity would be exempt in bankruptcy, otherwise it would probably be more complicated; however you would still have many options for filing.

Good luck,
Milton

[alh]

And if you live in a state with a large homestead exemption, you may want to look at a chapter 7. As was said earlier though, with that much equity, you have several options in paying your debt you might want to explore.

[Minnymouth]

Excellent response, folks..................

Minny

[Ineedhelp2]

Thanks for the answers.

How can I tap into the equity of my home to pay off debts? My credit sucks and I can't get another loan. I want to keep the house if at all possible.

In chapter 13, can I negotiate a 50% or less payback of my unsecured debt (as was discussed with the debt negotiaters)?

What happens with a 2nd mortgage that is due to be 100% paid back in a year? It's about $30,000 and I believe it is possible that it could be renewed, but I was not guaranteed that.

What does it usually cost to go through this?

[Ineedhelp2]

My home state is Oregon.

My total debt is about $50,000.

What happens with the cc companies when I continue to not pay them? Will they eventually file a lawsuit? Could I end up with a judgement and attorney fees? Once I have judgements, can they still be dealt with through bankrupcy.

My immediate concerns are that I am behind in house payments and want to avoid the foreclosure proceedings and I also have approximately $45,000 to $50,000 in credit card debt (about $6,000 of this is medical).

Is it possible for me to make a deal with the cc people and do the same negotiating the debt negotiators would do?

Again, my concern is that I cannot pay them right now and am worried about getting a judgement and garnishments, etc.

[Ineedhelp2]

I got the following info from an attorney site regarding chapter 7 exemptions.

I'm not sure I understant it.

What does a $30,000 exemption mean?

I thought an exemption was the value you are allowed to retain. Here in SW Oregon or anywhere on the coast, $30,000 is barely a down payment.

Also, what does it mean about an auto exemption of $2,100? Does that mean that's the most valuable care I can own?

Homestead$30,000 exemption for one debtor; $39,600 for combined exemptions of two or more debtors. Also, $23,000 exemption for manufactured home ($30,000 if more than one debtor).

Wages75 percent of weekly earnings exempt.

AutomobilesOne vehicle in the amount of $2,150.

Other Property Books, pictures and musical instruments to the value of $600; clothing, jewelry and other personal items to the value of $1,800; tools, implements, and books necessary for trade or business to the value of $3,000; domestic animals to the value of $1,000; household goods, furniture, radios, a television set and utensils all to the total value of $3,000; and all professionally prescribed health aids.

http://www.totalbankruptcy.com/state...on_summary.htm

[lrprn]

I got the following info from an attorney site regarding chapter 7 exemptions.

I'm not sure I understant it.

What does a $30,000 exemption mean?

I thought an exemption was the value you are allowed to retain. Here in SW Oregon or anywhere on the coast, $30,000 is barely a down payment.

Also, what does it mean about an auto exemption of $2,100? Does that mean that's the most valuable care I can own?

Check out the answer I left to this same question about what exemptions are that you posted in another thread.

A tip: We really do want to help, so please keep posting your questions - just do your best to avoid posting the same question in two places at once. You'll get better and more thorough answers that way, and also it's easier for new folks just arriving to find answers they need during forum searches if the question and answer are both in just one thread. This is just a suggestion - we'll do our best to answer every question anyway, but you are likely to find the second duplicate question won't have nearly as many responses from the more frequent repliers . Thanks for considering!

[SinkingFast]

That's the $$ amounts you're allowed to "keep". $39,600 on your house, if both you and your spouse file. If you file alone, you're allowed $39K in equity in your home.

If you went Ch 13, it looks on the surface, like you'd be in a 100% Unsecureds pay-back plan. Because you'd have $60K of excess equity. That's on a quick overview look. Because Creditors have to get as much in a Ch 13 payment plan as they would get if you filed Ch 7. In Ch 7, your house would be sold because you must be current in order to keep it.

Somethings to consider tho.

Have you had an appraisal done on your house recently? Maybe your home needs repairs or updates that would bring that value down somewhat.

Does the $100K take into consideration the costs to sell your home conventionally thru a realtor plus all associated selling costs?

One thing to keep in mind is Trustees do not get top price when they sieze and sell property. They quick sale. Plus, on average, for a house, the Trustee's costs to sell will be about 10%.

About Ch 13,........... In order for a Trustee to Confirm a Ch 13 payment plan, the Trustee has to believe the Debtor/Filer has the ability to pay the plan payments. If you've fallen on hard times, and your income sources are looking suspect, a Trustee may not allow you to proceed forward in a Ch 13 payment plan.

As far as whether you can refi and buy your way out of debt,......... Maybe, maybe not. Sounds like your Credit is already shot by your current mortgage lates. Getting a Prime Lender to work with you is probably not an option. That means you'd be shopping for a home loan in the Sub Prime Market. High interest rates and potentially predatory Lenders looking to take advantage of you and your situation.

You need to sit down and take a hard look at the over all costs of your house. Maybe the house is bleeding you dry financially.

Also, I'd suggest meeting with several attnys. Consults are generally free and you'll get a better idea of where you stand.

[Ineedhelp2]

The more reading I do in these threads and the more research I do on the internet, the more it looks like I cannot discharge any of my debts through bankruptcy.

In Oregon, the homestead exemtion appears to be only about $33,000, so chapeter 7 is out.

If I understand chapter 13 correctly, I cannot negotiate downward the amount I have to pay back if I have enough equity to cover it.

I very conservatively have at least $100k in my home, and my debts are around $50k.

So does that mean I cannot negotiate anything in my chapter 13 to get my debts below $50k? If not, then I would be better off trying to make deals directly with the credit card companies.

Also, I read somewhere here about buying out of a chapter 13 for 30% after one year. Does anyone know about that?

[lrprn]

If I understand chapter 13 correctly, I cannot negotiate downward the amount I have to pay back if I have enough equity to cover it. That is correct. There is no negotiation allowed by the debtor.

I very conservatively have at least $100k in my home, and my debts are around $50k.

So does that mean I cannot negotiate anything in my chapter 13 to get my debts below $50k? See my answer above - no, there is no negotiation by the debtor in Ch 13. You can ensure that your expenses include everything and that you and your lawyer have set your expenses appropriately for your community. If not, then I would be better off trying to make deals directly with the credit card companies. You can try - you may be one of the successful debtors who do benefit from debt management - I hope it works out for you.

Also, I read somewhere here about buying out of a chapter 13 for 30% after one year. Does anyone know about that? This depends on your trustee and court 'culture' and prior Ch 13 early buy-outs in your district. Most districts require you to have made 2 years of payments in a 5 yr plan, or a year in a 3 yr plan before they will even consider it. Think about it for a minute - if you can buy out of your Ch 13 within a year or two of filing, why did you have to file in the first place? Trustees will start digging for signs of a fraudulent filing if you try to buy-out too early. Also in many districts, if an early buy-out at year 1 or 2 is allowed, it is at 100% of what is owed to your creditors regardless of what your % payoff is now.

We don't know all the details about your case, so my apologies if this is an incorrect assessment. However, what it sounds like given our limited info at hand is that your house may well be bleeding you dry financially. Sometimes it's better in these circumstances to sell your house and use your considerable equity to pay off your $50K of debt outright and start over again in a more reasonable debt-to-income structure. Don't let keeping the house no matter what overwhelm considering every single option you have. Selling your house is one of those options, and could very well be your best one depending on your community's housing market at the moment. It's easy to keep searching for the 'miracle solution' that somehow solves all our financial problems without our making big sacrifices - I know because we searched and searched for a way out for over a year. Ultimately we had to accept the inevitable, make the sacrifices, and file. I sincerely hope in your case that you can avoid what we couldn't.

[Ineedhelp2]

Then there's no way bankruptcy can help me.

[SinkingFast]

If you use a Credit Counseling Agency, and pay thru a Debt Management Plan, you could be completely out of debt in 5 years or less.

Operative word there is COULD. Many CCA's are unscrupulous. You pay huge amounts of money which the CCA pockets, the CCA doesn't pay much if any on your debt, and a year later, you still have as much debt as you do now. Worse because you've spent a minor fortune spinning your wheels with the DMP.

You can TRY to negotiate with your Creditors. Chances are, you'll hear the same responses most of the rest of us have heard. NO!

Months after you go without making payments, some of your Creditors may offer up settlements. They may offer to allow you to settle the debt for 60%-80% of what's owed. Lump sum payment, of course. But the whole while you're waiting for you Creditors to make offers, your Credit is going down hill with all the missed payments. And, come the end of the year, the Creditors can issue a 1099 for the "forgiven" balances making all that money tax liable income.

Either way you go, DMP thru a CCA, or negotiating on your own, you're just that. On your own.

If you file Ch 13 BK,........... Even if you do wind up paying back every penny of debt,.......... The whole time you're in the plan, you're under the protection of the Automatic Stay. You don't get the Automatic Stay working with a CCA or negotiating deals on your own. If you wind up paying back less than 100% thru Ch 13, there's no 1099 waiting at the end for you. All remaining debt is discharged.

Lrprn gave you a very good suggestion. You need to take a long hard, serious look at your overall finances. How much that house is costing you in real $$ and cents. The house could be the driving force behind all this other debt and you simply refuse to see it.

Personally, were I sitting on $100K in equity with "only" $50K in Unsecured Debts,.......... I'd sell the house in a heart beat. Pay off all my Creditors, and look toward starting over in another house that's less expensive. One that fits better in your "real world" working budget.

[Ineedhelp2]

I really don't want to leave our house. It is a modest house that has been driven up in price because of a real estate boom in our area. A $1,100 mortgage is not the problem. I'm not going to do a whole lot better if I rent or buy a different house.

I'm just stuck right now because of a disruption in business and little or no income, but I'm trying to turn that around.