Scared to death but still ready to go!

[nervous&sure]

My dh and I owe about $42,000 in CC debt. Around March we came to the realization that a) we were paying 2x our mortgage payment amount just in cc bills every month and b) we owed more in CC bills than we did on our house. How depressing that was to figure out So, we decided to look into filing ch 7.

Well, today we go in to file our papers with our attorney, and I can't believe how nervous I am just about that lol. I keep going over our expenses sheet (From looking at the sheet she gave us and the Schedule J it looks pretty much identical) wondering if I over/undershot something somewhere. It's very difficult to summarize your monthly expenses in 10 lines, IMO, so I also filled out the expenses calculator at the california bankruptcy site (can't remember the link now) to show her, so that she can add things in if/as needed.

I've been lurking here for a while to get as much info as I can, and also to settle my nerves a bit (knowing what to expect makes it a lot easier to handle). Everyone here is so friendly and I it's taken a lot of stress off of me.

I do have a couple of questions though - we bought our house a year ago (which we'll be keeping) for $41,000. I believe it appraised for $45,000. We got a federal grant for $5,000 to help with the down payment. Basically, it shows up as a 2nd mortgage (we signed this at the closing) and stays listed as such for 5 years, after which that $5,000 is forgiven and we owe nothing on it. Our balance on our mortgage shows as ~$37,000.

So my questions are this:
1. Since that $5,000 is considered a 2nd mortgage right now, is this something that should be listed? It does not show up on our credit report, but I clearly remember signing the agreement at the closing.
2. Does the court/trustee look at what you paid (in our case $41,000) or what the house appraises for? Because right now I'm not sure if we would be considered as having $8,000 or $4,000 in equity in our home. Either way we are well under our state's homestead exemption, but I am curious about this.

Thanks so much

[anonymuse]

Are you saying you actually bought the house for $41,000 or is that the amount owed? (Where do you live? I want to move there if homes are that inexpensive!)

[SinkingFast]

This sounds a bit more complex than the typical straightforward loans we normally discuss here.

As a CYA, I'd run this issue past an attny.

On the one hand, it's a grant that does not have to be paid back. BUT there's a string. You must own the home a certain period of time before the grant is "forgiven". Is that right??!!

Would seem, if that's the case, and you're within the required ownership time period, then it's a debt to be considered in the BK. Because, until the grant expires and is forgiven, that's $5K of equity unavailable to you for use as collateral for another loan, or that you'd get if you happened to sell in that time frame.

Have you looked thru the paperwork of the Grant to see if there's anything in your agreement addressing provisions should you happen to default??

[nervous&sure]

Are you saying you actually bought the house for $41,000 or is that the amount owed? (Where do you live? I want to move there if homes are that inexpensive!)

The actual house purchase price that it was sold to us for is $41,000. The balance is ~$37,000...but that's with the grant I mentioned in my first post.

We live in a very rural area; I believe our town has only about 750 people. This house was actually fairly cheap by surrounding town standards, but it does need work (mostly cosmetic: wallpaper, paint, etc). I'm not complaining - we're actually saving $150/month over the place we rented previously.

As a CYA, I'd run this issue past an attny.

Of course; just wondered if any one might have an idea.

BUT there's a string. You must own the home a certain period of time before the grant is "forgiven". Is that right??!!

Yep. We have to own the house and actually live in it for 5 years, and then the debt is forgiven.

Have you looked thru the paperwork of the Grant to see if there's anything in your agreement addressing provisions should you happen to default??

It says:

"I will be in default if any of the following happens:
(a) I break any promise I have made to Lender, or I fail to perform promptly at the time and strictly in the manner provided in this note or in any other agreement I have with Lender.
(b) Any representation or statement made or furnished to Lender by me or on my behalf is false or misleading in any material respect.
(c) I sell or transfer the property in violation of the subsidy provider's policies.

Since we are up to date in payments with the bank and will be keeping the house, and since I see nothing in the mortgage or other paperwork that indicate we have defaulted, I believe we are okay in that respect.

[JusticeForAll]

Read the fine print on your mortgage. Is there a BK clause in it? Some Loans/Mortgages, even though current, consider a BK filing as a default.

I'd check on that, and also ask your attorney about that specifically.

[nervous&sure]

Read the fine print on your mortgage. Is there a BK clause in it? Some Loans/Mortgages, even though current, consider a BK filing as a default.

I'd check on that, and also ask your attorney about that specifically.

This is what it says for default:

(a) Late charge for overdue payments
<This basically just says we have til the 15th to make our monthly payment or be charged 5% of the overdue payment.>

(b) Default
If I do not pay the full amount of each monthly payment on the date it is due, I will be in default (Not a problem; as I said, we are current)

(c) Notice of Default
If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

Before we actually went for our initial consultation, I scoured our mortgage papers to make sure there was nothing in it about bankruptcy. I couldn't find anything then and I can't now.

I do know that we signed an agreement at the closing that said if we got behind on our mortgage we agreed to go for financial counseling, but that's all as far as that went.

[brainless twit]

Hi nervous&sure,

My husband and I have the same type of 2nd mortgage on our home, and we've been here 2 years so our balance is $3,000. I could be mistaken, but I think you are going backward on your mortgage balance - in our case, the balance of the original mortgage is $64,000 but if we sold right now we would also have to pay back the $3000 that hasn't been forgiven yet. So our actual balance (if we had to sell right now) is $67,000.

In your mortgage paperwork, there should be around 10 pages (+/-) that refer to the second mortgage. Take these to your attorney and explain that this mortgage is forgiven over 5 years and that there is no payment associated with it. For us, the down payment assistance is a state program, and our attorney was very familiar with it. It will show up on credit reports, so make sure s/he knows about it ahead of time so there is no question.

[nervous&sure]

Well we met with the lawyer yesterday and ended up with a list of even more stuff to bring in. I thought we were totally set, but at the same time I'm glad she's being thorough now so we don't have to scramble later. She doesn't pull any punches, that's for sure

One question I do have - we were putting money aside during the year as we could to save up to be able to hire an attorney. I kept the cash in a jar until we had enough, and deposited it yesterday to be able to write the lawyer a check - for an amount this large (about $1050) I just didn't feel comfortable handing her cash.

Normally we do not have deposits like this in our checking; is there any reason this would cause a problem to the trustee? I mean, our statement is going to show the money going in yesterday and back out probably by tomorrow or Monday.

I just want to make sure we fly as far under the radar as we can, if you know what I mean .. i's crossed, t's dotted, that sort of thing

[debtisbad]

Nervous, where do you live if I may ask. If it is a warm climate, I will be your new neighbor

[razorguns]

as house prices go off the roof

bk and debt in households will increase.

Sad but that's today's reality. People gotta live - so unless they want to live 2 hours away or in a ghetto hood - they sign on to pay half their salary for a mortgage.

job layoff, medical costs, college, etc. all events which can force people over the edge and into problems.

It's nothing to be scared of. It happens everywhere in big cities with high costs of living.

r