Foreclosure time frame and means test question

[berrymom31]

Okay, I am going to quit my job to put us closer to the median and were going to try for a 7. We will be around 10,000 over the median. Our house payment now is 2200 per month with 2 mortgages combined. We'd like to move and find a place to rent for about 1200 per month, but the we found that the rent and not the mortgage payment would then be used for the means test. If we stay it out in our house through the foreclosure process....and stop paying our house payment in anticipation of letting it go....would they then use the mortgage payment for the means test? Then after we file and have been discharged....find a cheaper house? How long could we stay here? I've read some people stay for a year or more before they are finally forced to leave...I'd love to be able to stay until the end of this school year at least....I'm afraid we will need the mortgage payment included in our means test in order to qualify.

[Help!]

I'm guessing that for a family of 5 the IRS Standards, depending on your area, allow about $1400/mo. for rent (or something like $1800/mo. for rent + utilities). Regardless of where you live, I would be conservative and use this number on the means test instead of the mortgage payment.

If getting a place to rent now and getting settled before school starts is a high priority, I would go ahead and do that. I'd make my combined rent + utilities as close to the IRS Standards for your area as possible.

If it is worth it to you to risk having to move the family in the middle of the year, you could stay in the house and save some money. You really shouldn't make a decision like this just to qualify for the means test if it's not what you want to do because there's always a chance the Trustee or UST will take issue with something else on your means test and try to convert you to a 13 anyway. The likelihood of being converted depends on how the Trustee and UST feel about your case, not whether you feel you pass the means test. So, you just have to decide what is best for you and your family and cross your fingers. There just aren't any guarantees when you file Ch. 7 above median, and there's not really a way to make your case "conversion proof".

These are difficult decisions, especially with kids. Mine took all of these major changes in stride and it was sort of an adventure for them. They were much more resilient than we thought they'd be.

[Help!]

Forgot another point I wanted to make... the other drawback to waiting until you absolutely have to move is that you may have a hard time finding a place to rent once you file because of your credit report. You might find that you can get a place to rent but the deposit is enormous.

[sick of debt]

We stopped paying our 1st mortgage in October 07, they would not take partial payment. We continued to pay pur second until 2/08. We listed our house for sale in August of 07, when we realized it was getting tough to keep up. Well we all know the real estate market. Anyways, we were working with our 1st mortage to consider a short sale if an offer came along. We did some offers, but PLEASE give me a break. We met with our first attorney 2/08, he wanted us to do a short sale if possible, then file. Well a short sale never panned out. This particular lawyer could not represent us because he also represents the bank our mortgage is through. Well, the house went into foreclosure in April. there was suppose to be an auction in June. Mortgage company bought the house back from the foreclosure attorney, action co. For some reason it was never placed in the paper as a foreclosure, trust me I am not complaining. It just recently went up for sale and is now pending. Through all of this we never heard from our 1st mortgage.
We moved into a condo in April, so the house was vacant for a while. The mortgage companty took it upon themselves to have a locksmith change the locks. I am glad I had everything out.

[berrymom31]

Thank you Help. We are lucky in that DH's parents have offered to buy a house and let us rent/make the mortgage...we are looking at a two different houses..one is 99,900 and one is 124,000....I'm guessing the one for 124,000 might be a safer bet since it would make the payment closer to the IRS guidlines...I think it's like 900 in MO for rent..and 500 for utilities...then we get 1600 and some change for food and clothing per month...which is very generous. Were looking at houses this weekend and the one for 124,000 is empty so I'm thinking they could do a quick close and we could move in sooner...so we can get sort of settled before school starts.

I'm hoping my kids are able to bounce back. They have so many friends in this neighborhood....my 10 year old son's best friend lives right behind us and they are in the same grade and hang out every day.....we've talked to him about this and he realizes were stressed and says he is okay with moving...but we are moving about an hour away....and it breaks my heart...I'm crying about it now...I just want to do whats best for them and I would work 10 jobs to make sure that will happen. But in this case the harder we work the more we'll have to pay each month in a 13 and the less money we have the "better" off we'd be, financially.....I'm just confused and sad. Thanks for your help.

[Help!]

I have to tell you that I would not complicate my Ch. 7 filing right now by doing what you're considering. When parents/family/friends are involved in any part of the financial picture it draws more scrutiny to your case (and there will be enough scrutiny already if you're above median).

If the success of your Ch. 7 case is really important to you and you are adamant about not being pushed into a 13, I would recommend renting elsewhere for the time being or staying in your house, then following through with the plan DH's parents have offered *after* discharge. I know it will be incredibly stressful, but in the long run it will be worth it. They lifestyle change is really uncomfortable, but if you get through it and get your discharge you will bounce back. I understand the sadness, but it is temporary. You will not believe how much better you will feel when it is over!

[MajorMike]

Its only 5 years of being in this...not the end of the world...
It's going to be tight but it's better then the creditors calling and driving you nuts. Help! is absolutely right....

[berrymom31]

Help, how do you think it would complicate the chapter 7? I hadn't even thought about this. If we rented a house, why would it matter if DH's parents owned it or if a stranger owned it? How would anyone even find out? Sorry for all the questions, but we are sort of in the middle of this process and I'd like to know so I can stop it if I need to.

We are not planning on hiking the rental price more than the mortgage payment or anything like that. In fact, we are trying to get the payment at or below the IRS allowed rent amount for our state. I guess we just thought it would be like any other rental house, only we could paint any of the walls we wanted!

Thanks for your help..

[ThreadsSnapping]

If the rent is comprable to what she would be paying someone else, I'm not sure that the trustee can really say much about it. Now if it was $500 more than what the same house could be rented for from someone else that would be a problem an possibly viewed as fraud.

I would recommend getting a written lease and paying your rent every month by check.

TS

[Help!]

Help, how do you think it would complicate the chapter 7? I hadn't even thought about this. If we rented a house, why would it matter if DH's parents owned it or if a stranger owned it? How would anyone even find out? Sorry for all the questions, but we are sort of in the middle of this process and I'd like to know so I can stop it if I need to.

We are not planning on hiking the rental price more than the mortgage payment or anything like that. In fact, we are trying to get the payment at or below the IRS allowed rent amount for our state. I guess we just thought it would be like any other rental house, only we could paint any of the walls we wanted!

Thanks for your help..

Think of it this way... if you got into trouble and couldn't afford to make your rent payment one month, would a stranger allow you to skip a payment? I'll bet DH's parents would. The Trustee knows this and I think it weakens your position, makes the rent a less concrete expense. The Trustee may not say or do anything about it, but I think it changes his perception of your financial position. If DH's parents are helping you out this way, what else are they doing for you? He may wonder if you have $1200 down on the lease agreement with DH's parents but you're really only going to be paying $800.

I also saw the interest in our case trustee's face when talking to other filers about financial matters involving family members at our 341 hearing. Whenever something like this came up, the trustee asked many more probing questions.

I think when you're above the median you want to draw as little attention to your expenses as possible. Paying rent to a family member is interesting, in my opinion.

[berrymom31]

Thank you Help! I had not even considered this to be any sort of problem. Rentals are very slim pickings where we are moving..small town...there are no duplexes or apartments and with three kids...it's very hard to find a place where we all fit! I'll certainly discuss this with DH and weigh our other options.