SETTLEMENT on 2nd

[tightrope]

Hypothetical at this point, but if we are able to settle our second, what would be the best way to pay for it and how would it affect the Ch7 filing?

I know waiting till after 341 or a discharge is probably better, but if we are offered a settlement, we will have to jump on it, so it will have to be paid for before BK is filed.

Options:
1. Borrowing from relative who pays it directly to the mortgage bank. Later paying relative back with tax refund before (or after) filing.
2. Money gifted by relative who pays it directly to the mortgage bank.
3. Employer advances future pay and pays bank directly.
4. Refinancing the car (currently paid off, is this even possible with bad credit?) and paying the bank.

Can anyone think of other (better) options?


.

[TEW]

Hypothetical at this point, but if we are able to settle our second, what would be the best way to pay for it and how would it affect the Ch7 filing?

I know waiting till after 341 or a discharge is probably better, but if we are offered a settlement, we will have to jump on it, so it will have to be paid for before BK is filed.

Options:
1. Borrowing from relative who pays it directly to the mortgage bank. Later paying relative back with tax refund before (or after) filing.
2. Money gifted by relative who pays it directly to the mortgage bank.
3. Employer advances future pay and pays bank directly.
4. Refinancing the car (currently paid off, is this even possible with bad credit?) and paying the bank.

Can anyone think of other (better) options?


.

It would be best if you learn more about BK before you even think about these things.
Settle what, the loan would be discharged

[Mensa1]

Tightrope: The asnwers depend mostly based on the Bk exemptions of your state. Each state affords different exemptions. Depending on the homestead exemption in your state, you could end up making your situation worse by settling your 2nd mtg prior to filing Bk by creating more equity in your property. So it all depends on details.

You also want to be very careful about accepting any funds from family members prior to filing b/c it could even effect your means test and you may not qualify for a Ch 7 following the gift. So any funds should flow from family member to creditor directly, not touching your hands at all.

You can discharge a 2nd mtg legally by filing a Ch 13. It strips the mtg lien and converts the debt into unsecured and is paid like every other unsecured creditor over the life of the plan. Just another option.

Lastly, you would likely have better results with settling the 2nd mtg after being discharged, assuming filing Ch 7. At that point you are no longer personally responsible for the mtg, and if the total equity in underwater then the lender has much more motivation to settle since the only place they have left to look for repayment is from the property (with NO equity from which to be paid). Many of these 2nd mtg lender will charge off the debt after a Bk and it can essentially be settled like offers to defaulted cc's; 20-30% on the dollar.

[HHM]

Non-starter, 2nd mortgage is not going to settle BEFORE the BK.

The leverage you get to settle the 2nd comes from the fact that you discharge your personal liability on your 2nd mortgage in chapter 7 BK. That leaves the mortgage lender with a worthless foreclosure right. Hence, since, as a practical matter, the lender is not going to foreclose, they will accept a small settlement, usually about 10%, to remove the lien.

As far as funding, it really doesn't matter relative to the BK, since the settlement can only happen after the BK.

[tightrope]

It would be best if you learn more about BK before you even think about these things.
Settle what, the loan would be discharged

If it wasn't obvious, I'm keeping the home and the 2nd (or it's lien) is not discharged in Ch7.

Now, do you have any constructive advice?

[tightrope]

Thanks for all for the advice so far.

To clarify...

We're in negotiations to settle the 2nd right now. So they are willing to settle before BK, we just have to agree on the amount.

Things change and who knows what would happen in the future, so as I mentioned before, if they offer something we're happy with, we will jump on the offer.
Ch7 does not discharge the 2nd lien and we don't want this to hang around our necks and worry about it in the future.

So we will be settling before filing for BK and the funds will be coming from the relative or the employer.

Based on the above, what are the best ways to pay for this settlement.
I do understand that under some of the options, the amount will be added to the income for the means test calculations.

We're in PA, so will be using Federal exemptions.

Could someone chime in with specific steps for paying this settlement and the effects on Ch7 filing of each option?

Thanks

[pcn]

What about your situation is causing the 2nd to be motivated to settle pre-bk?

[Overmylimit]

I know waiting till after 341 or a discharge is probably better, but if we are offered a settlement, we will have to jump on it

Why?

Why do you have to jump on it? Because you think the banks only going to have this offer once? I am in Chp 7 and keeping my house. My 2nd is 180k and I haven't paid anything on it in a year, my 1st is current. If your house is upside down they won't foreclose on it and if you settle it before the BK is over that will probably raise questions as to how you could come up with funds for the lender but no one else...also like HHM said once the BK is over the note will really be worthless, so why not wait to settle for even less?

They will really be willing to settle once they see you have been discharged, because they will truly no you don't have the means to pay

Oh and this is constructive advice

[blondeinmn]

Hey, overmylimit, I was wondering if being behind on your second caused any problems with filing a chapter 7 and keeping the home. Did you state your intentions as to keeping the home. Any pitfalls I should know about.

[Mensa1]

Thanks for all for the advice so far.

To clarify...

We're in negotiations to settle the 2nd right now. So they are willing to settle before BK, we just have to agree on the amount.

Things change and who knows what would happen in the future, so as I mentioned before, if they offer something we're happy with, we will jump on the offer.
Ch7 does not discharge the 2nd lien and we don't want this to hang around our necks and worry about it in the future.

So we will be settling before filing for BK and the funds will be coming from the relative or the employer.

Based on the above, what are the best ways to pay for this settlement.
I do understand that under some of the options, the amount will be added to the income for the means test calculations.

We're in PA, so will be using Federal exemptions.

Could someone chime in with specific steps for paying this settlement and the effects on Ch7 filing of each option?

Thanks

If they are willing to settle before BK they will prolly give you the paper after discharge. However, you seem adament about settling before, so be it.

Just do not accept any money from employer or relative with your name on it. Any proceeds paid by whomever should go from their acct directly to the creditor without having any endorsement from you at all. Receipt by you could effect your means test b/c the funds would be considered income.

One last thing, make certain that the release of the 2nd mtg does not in any way advantage any other creditor that might have a judgment lien. For this reason and about 6 more, you are sooooooooooooooo much better off waiting until post discharge... but I will say it no more, you know what you want to do here. Just be cautious and I would also suggest the assistance of a local title co or Atty to advise here just to make sure that things are done correctly as to release, etc and that another lien does not attach.

I'm done.

[Mensa1]

Hey, overmylimit, I was wondering if being behind on your second caused any problems with filing a chapter 7 and keeping the home. Did you state your intentions as to keeping the home. Any pitfalls I should know about.

Being delinguent on the 2nd almost gives you an advantage. With that situation it is for certain that the TT isn't going to intervene when it would take X number of dollars to cure the default.

[HHM]

I really see NO REASON why you must settle before BK. Any source of funds you use will be at risk in your BK.

They WILL settle after the fact. They will be more inclined to settle after the BK.

Unless they offer 5% or less, NOW, there is no deal worth accepting before the Bk.

[blondeinmn]

Mensa, what advantage are you refering to. I don't think anyone will try to cure the default. First mortgage is upside down by $60,000.00 at least. Greentree is the servicer by the way. They are an interesting bunch to deal with.

[tightrope]

Why?

Because a bird in the hand... you know how the rest goes!

The idea that the 2nd will settle for better terms after the BK is a logical one and may be fine in theory, but in practice, anything could happen, and you may or may not get as good or better terms.

So, I'm not looking for advice on whether to settle before or after but on the best way to pay the settlement before the BK and the effects the different payment options will have on my filing.

[blessed]

Any source of funds you use will be at risk in your BK.

Here's one answer.