Using tax refund to catch up on mortgage

[WC Nurse]

We are in CA and just filed our taxed on 1/30/09. We are going to get $2358 back from the Feds on 2/13/09. From the state we're supposed to get $1107 back, but because of the CA budget crisis, we get an IOU instead. Who knows if or when we will ever get that money. It might just be applied to next years taxes.

We owe January and February's mortgage payment of $2577 + late fees. Total we owe is $5,262.63 as of 2/1/09. We are going to use the tax refund to help catch us up on our mortgage. Only by using the tax refund can we catch up; without using it we would always be a month behind due to my husband being laid off for the last 7 months.

We have not filed for bankruptcy yet; we're going to meet with a bankruptcy attorney this week for a consultation and will probably not file for another month. Is there a problem with us using the refund to pay our mortgage? It's not like we're using it for anything extravagent...just trying to keep our home.

[StartingOver08]

No, just show that the money was used to 'catch up' your mortgage.

Are you planning to keep the house? I am serious. Is this a temp issue or a long term issue (the unemployment)?

Do you have equity in the house? If not, are you upside down by a large factor (I'm not talking $5k here)?

If you are upside down, do you want to keep the house or give it back?

One of the most important things for you to do is to determine your post BK budget BEFORE filing so you know which direction to go. You may want to consider giving the house up in CH 7 and truly taking advantage of your fresh start. I know it is hard to do (I gave up my home too). But you don't want to catch up your mortgage if you are going to officially give back your home. There are payments I made several months prior to filing I would never have made had I realized that giving up my home was the best option in BK.

Consider your individual post BK budget long before filing to figure out if you want to keep some of your secured (house, car etc) items.

[WC Nurse]

Thanks for the reply. Yes, we want to keep the house even though we are upside down almost $100k. The cost of rent on a place large enough for all 4 of us + 2 dogs, 5 vehicles, would not be much less than what we pay now. Plus I work out of my home and need my quiet home office, so its best we stay where we're at.

The unemployment will be temporary but may last another few months. He's a union carpenter and things are very slow where we're at. He's #105 on the union out-of-work list but will eventually be called back to work. Once we stop paying on all the credit cards, we can cover all our household expenses on my income and his unemployment. Things will be tight but doable.

I'll make sure I have the documentation to show that I used the refund to catch up on the mortgage. I didn't think there would be a problem with it but got scared after reading some of the posts on here. I'll see what the BK attorney says when I meet with him this week. Hopefully, he says it won't be a problem as long as we file after receiving and using the refund.