We want to file chapter 7 but ....

[tay666]

I am not sure if we can.

Here is the situation.
We live in Ohio.
Our combined income is about $38,000 a year and have secured and unsecured debts of about $110,000.
Our house is worth about $50,000 and we owe about $20,000 on it.
The other secured debt is my wifes car that is upside-down on the loan, she owes a lot more than it is worth. My car is a '96 Century that I bought outright for $2000 three years ago.

About a month or so ago we did a consultation with an attorney.
He said that the equity in our house would be a problem. And while he didn't come right out and tell us to do it, he suggested that we try to get another loan against the property then use the money to fix up the house, fix my car, and buy another car for my wife (and let the other one go back to the dealer). And as soon as we get the loan to stop making any payments to anyone who we will be claiming in BK.
First of all, no one in their right mind is going to lend us money.
Second of all, I am not sure I like his advice anyway. After checking online and reading a whole lot of stuff here I see several holes in his thinking.
First of all, from what I understand in Ohio, we can only keep one car anyway. So why get another for my wife? Or am I mistaken there, as we each need transportation to get to work?
Also after reading a lot of tales here, I get the feeling this guy was just interested in getting his $2000 for filing. He really glossed things over. Said he could guarantee us a clean slate, etc...
I am looking around now for other attourneys in our vicinity to talk to.

Regardless though, I know that equity is going to be a problem.
Is there anything we can do to keep us in chapter 7 as opposed to chapter 13? I really don't think we could make a 13. By the time we pay the mortgage (which is current by the way), the utilities, buy groceries and everything else, there really isn't anything left over.
We also can't afford to loose the house. Not just because we are attached to it, but because our payment ($430) is cheaper than anything we could rent. Most houses in the area go for at least $400-450 a month unfurnished and no utilities included.

Any help or guidance in what to look for would be greatly appreciated.

[no_it_all]

You can try moving your excess equity in your house to assets that are exempt, but if you file shortly afterwards you might run into some legal issues....

If you can't refinance the house you are pretty much dead in the water anyhow, and will most likely either have to A: "buy" your excess equity (about 20K) from the BK estate or B: pack your bags....

[SinkingFast]

If you try to go the Ch 7 route, your excess equity in the house is gonna be an issue.

From what I've read, Ohio has a $5K Homestead Exemption. I haven't read any where you can double. There's also a $400 WildCard Exemption you could apply. If you can double the WC, that's $5800 of your $30K in equity you could protect. That leaves a chunk of unprotected equity the Trustee will most likely go after.

Probably the only way to protect your house would be with a Redemption Loan. Redemption Loans come at a premium on interest. You'd be worse off than letting the house go, pocketing your Exemptions monies, and renting elsewhere.

[Ch7Ted]

If I understand you correctly, you and your wife have an income of $3,000 per month and a mortgage of around $400 a month. You have $30K equity in your house but you also have $110K in secured and unsecured debt.

Have you visited credit counseling? Sounds like you're the perfect candidate to pay off $110K in debt over the next 5 years. Chapter 13 BK is basically federal mandated credit counseling.

Do not sell your house - make payments on your wife's car and visit credit counseling to get this $110K in debt under control. Bankruptcy will not help you....

[tay666]

Yes, our gross pay is about $3000 per month, but our net pay is only about $2000 a month. After taxes and the $50 a week for my family health insurance at work there just isn't much left.
I can't drop the insurance as my wife has several medical issues that require multiple perscriptions and doctors visits every month.
Which is how we got in this situation. She had to take a different job with less hours and lower pay. And with the co-pays and medical bills, it was just too much.

I will check into it. But unless the creditors are willing to take about 10-15 cents on the dollar, I don't know how we could pay them off in 5 years.

[Ch7Ted]

The credit counseling will transform payments that are made to all your creditors into one payment.

I was $60K in the hole (excluding mortgages) with credit cards and medical expenses and a credit counseling agency proposed a 5 year repayment schedule as long as I could send in $1,000 every month. I was not earning any income at the time and bankruptcy was my way out. Now I have a disability income and a payment plan to repay 2005 State Taxes. I was able to discharge nearly $50K in credit cards, medical expenses and unsecured loans.

If all your payments are on time and your credit report is good - try the credit counseling. Bankruptcy will put a negative stain on your credit and your mortgage holder may come after you for the house. Taking out a home equity loan or a second mortgage is not a good idea at this time.

[tradewiz50]

Since you live in Ohio and your married? Then if only one can file Chapter 7 you can keep the equity in the house by using a exclusion know as Tenants Entirity.

I am not sure if we can.

Here is the situation.
We live in Ohio.
Our combined income is about $38,000 a year and have secured and unsecured debts of about $110,000.
Our house is worth about $50,000 and we owe about $20,000 on it.
The other secured debt is my wifes car that is upside-down on the loan, she owes a lot more than it is worth. My car is a '96 Century that I bought outright for $2000 three years ago.

About a month or so ago we did a consultation with an attorney.
He said that the equity in our house would be a problem. And while he didn't come right out and tell us to do it, he suggested that we try to get another loan against the property then use the money to fix up the house, fix my car, and buy another car for my wife (and let the other one go back to the dealer). And as soon as we get the loan to stop making any payments to anyone who we will be claiming in BK.
First of all, no one in their right mind is going to lend us money.
Second of all, I am not sure I like his advice anyway. After checking online and reading a whole lot of stuff here I see several holes in his thinking.
First of all, from what I understand in Ohio, we can only keep one car anyway. So why get another for my wife? Or am I mistaken there, as we each need transportation to get to work?
Also after reading a lot of tales here, I get the feeling this guy was just interested in getting his $2000 for filing. He really glossed things over. Said he could guarantee us a clean slate, etc...
I am looking around now for other attourneys in our vicinity to talk to.

Regardless though, I know that equity is going to be a problem.
Is there anything we can do to keep us in chapter 7 as opposed to chapter 13? I really don't think we could make a 13. By the time we pay the mortgage (which is current by the way), the utilities, buy groceries and everything else, there really isn't anything left over.
We also can't afford to loose the house. Not just because we are attached to it, but because our payment ($430) is cheaper than anything we could rent. Most houses in the area go for at least $400-450 a month unfurnished and no utilities included.

Any help or guidance in what to look for would be greatly appreciated.

[SinkingFast]

Since you live in Ohio and your married? Then if only one can file Chapter 7 you can keep the equity in the house by using a exclusion know as Tenants Entirity.

TradeWiz is correct about the Tenants in the Entirety. If your home is titled that way, and if the bulk, if not all, of your debts are owed by one of you.

You're gonna have to do Credit Counseling as a pre requisite for filing BK anyway. Definitely no harm in getting a professional prospective of your finances. See if a Credit Counselor can put together a Debt Management Plan that's workable for you.

Here's a link to the DOJ Website:

http://www.usdoj.gov/ust/

In the Bankruptcy Reform box, click on the link for Credit Counseling and Debtor Education. On the next page, upper left, select Approved Credit Counseling Agencies. Then look for the ones approved for your State.

[lrprn]

Not to burst the debt settlement plan program advantages over bankruptcy bubble here, but being in a debt management plan does indeed negatively impact your credit scores.

From http://www.ehow.com/how_2002283_debt...ettlement.html :

"Both bankruptcy and debt settlement can hurt your credit rating for many years, although engaging in one or the other is a positive sign to your creditors you are taking your debt problems seriously.

If you wish to buy a house in the decade following filing for bankruptcy or using a debt settlement service , your ability to do so may be severely limited. On the other hand, once a bankruptcy has been discharged, meaning debts that could be erased from your credit report should be removed, creditors know you can't file again for many years. Because of this, many are willing to extend you credit, despite your bankruptcy filing. However, it will likely cost you more.

In most cases, debt settlement will not stop harassing calls from creditors.
Debt settlement will not help you reduce the amount you owe on your mortgage, car loan, or other secured debts. In these situations, lenders can repossess the collateral to collect on the debts they are owed."

[tay666]

Since you live in Ohio and your married? Then if only one can file Chapter 7 you can keep the equity in the house by using a exclusion know as Tenants Entirity.

That would be an idea.
Several of the debts are joint accounts including both secured debts.
The unsecured are split between the two of us. So a BK wouldn't wipe out a majority of it.
If I filed it would only wipe out about $25,000.
But if my wife filed a 7 it would wipe out somewhere around $30-40 thousand and a large quantity of the actual bills.
(multiple medical bills as well as a whole lot of small loans)
So that would leave a lot fewer things to actually pay each month.
Also, all the ones that are past due or have been past due, are in her name.
So her credit history is already taking hits. While mine isn't.

That coupled with some credit counseling, might just do the trick.
If I could get the interest down on the remaining cards we would be able to pay them and still keep food on the table.

[tay666]

If you can't refinance the house you are pretty much dead in the water anyhow, and will most likely either have to A: "buy" your excess equity (about 20K) from the BK estate or B: pack your bags....

You know.
The more I think about this the more that last option doesn't seem so bad.
Before everything started falling apart (my job moved overseas, and the wife's medical problems) we were looking at moving anyway.
What held us up was no one was interested in buying our house. Even though realtors had it listed for almost a year.
Even if we could get a loan to eat up the excess market value equity and get a bunch of work done to the house, I don't think it could realize an actual sale for what we would owe on it. So we would actually be stuck here for years with no real equity in the house.

If we let it go and completely started fresh, we would probably be better off in the long run.
Just took a while to come to grips that letting go the house we have lived in for 15 years might actually be the smart thing to do.

Still not going to do anything until we do at least a couple more consultations and see what some more lawyers have to say.
But I am so glad I found this place so I can explore my options. And arm myself with some specific things to ask about in the consultations.

[lrprn]

If we let it go and completely started fresh, we would probably be better off in the long run. Just took a while to come to grips that letting go the house we have lived in for 15 years might actually be the smart thing to do.

To get to this point took a lot of courage, tay - it's very hard to think about letting go of something that has been such a large part of your lives for so long. But if letting go means that you truly do get a fresh start without dragging around an asset that is more like an anvil around your neck while swimming in a deep pool, then good for you!

They say bankruptcy is depressing and horrible, but when you're here among those of us who are also trying to stay afloat, the light slowly dawns that in odd and unexpected ways, bankruptcy can also be an opportunity to stretch and grow as people too! Keep us posted on what you decide, and know that no matter what happens, we'll be here rooting for you!

[SinkingFast]

Still not going to do anything until we do at least a couple more consultations and see what some more lawyers have to say.
But I am so glad I found this place so I can explore my options. And arm myself with some specific things to ask about in the consultations.

One thing I would suggest is you fess up, during the Consults, when you think the timing is right, that you're open to surrendering your home.

Most people BK attnys see will do almost anything, including shake the hand of the Devil himself, to keep their homes. And that's probably the perspective you will get from about any BK attny chatting with you in a Consult. That you want to save your home so they are gonna work from an angle to protect your equity.

[tay666]

One thing I would suggest is you fess up, during the Consults, when you think the timing is right, that you're open to surrendering your home.

Most people BK attnys see will do almost anything, including shake the hand of the Devil himself, to keep their homes. And that's probably the perspective you will get from about any BK attny chatting with you in a Consult. That you want to save your home so they are gonna work from an angle to protect your equity.

Thanks for the tip.

Right now, I am so glad we didn't just go blindly with the one lawyer we talked to. The more I read and learn, the more I realize how much he glossed over.
He took a look at our income and our debt and basically said if we could do something about the equity he could guarantee us a chapter 7, no problem at all. We could file in the spring and be free this summer.
Sure, best case scenario maybe. But from what I have learned since then, nothing is guaranteed and it could drag out a lot longer than that.
Hopefully we will find a lawyer that is more honest about things. And will realistically list our options.

[SinkingFast]

Getting over the mental hump of what you have to keep and what you're willing to give up is the tough part. We had no choice about our house. Our lives had moved on so keeping it was not realistic.

Many other people here are emotionally wrapped up in their homes. They cannot see the forest for the trees. That the house is driving all the other debt. Get rid of the house, find a more reasonable place to live, and regular, dailing living expenses will fall into place.

But that's what attnys deal with, day in and day out. So they automatically assume that's the route you want to go. In order to get what you want out of your BK, you may have to give on the house, take your Exemptions money and walk away.

Only you can make that decision. But if you originally stayed put because you could not sell the house, this would be a good a time as any to dump and run.