SETTLEMENT on 2nd

[nichole04]

I think this may vary by state. I live in Georgia and even though my bk lawyer can protect some of my cash, he wants me to have as little as possible in the bank the day we file. I spoke with him last week about the IRA
accounts and he said that is what I should do and it can be exempted. This is definately something you should ask your lawyer about before filing.

[Apocalypse]

One other consideration, is that payments made to ANY creditors within (I think) a year of filing ***can*** be considered "preferential treatment" and can also be reversed by the court.

You know, when people file Pro Se and denounce the value of a good BK attorney, I ALWAYS rebut them. I think you DO need one! To protect you from YOURSELF. The laws are actually quite complex, and they play off of each other a lot. There are a lot of "if/then" scenarios that can crop up when one of your creditors responds to the filing in a way you didn't expect. VERY reassuring to have counsel at your side to give you the RIGHT answer.

[Apocalypse]

I agree... although DO check on the IRA. Money transferred to IRA's within (I think) 120 days of filing is considered seizable by the Trustee. Might be better off leaving it in your checking account. Tax refunds are NOT (again, I THINK) seizable because it is a REFUND. You already paid taxes on that money, and you are allowed to keep some cash. Just check, to be sure ;)

[tightrope]

It's not unless you wait it out...
....then maybe you get your 2% you're looking for..
Your original question asks how it would effect your BK and it sounds like everyone gave the same advice so take from it what you will..
As to the best way for the settlement cash...ask a rich relative would be the fastest way if you have the means although we all advised against it

It would be great, but I'm not necessarily looking for 2%, I'm just looking for an amount that is reasonable and I'm happy with.

As far as the advice given, except for Mensa1, who recommended that the money go directly to the mortgage bank, all I've heard is that settling after BK is better than before. Well, I already knew that!

But because I will settle before BK, I asked for advice on the best way to pay for this settlement before filing and how different payment options will affect my filing.

Again, the only specific suggestion was from Mensa1, and although he didn't expand, I assume the reason for direct transfer would be so the payment amount is not added to my income for the means test.

Others suggested that this payment would be "undone" but never explained on what grounds. Why would any payment to a secured creditor be "undone"?

My other option which I didn't mention would be to ask for my vacation pay and depositing that in my bank and paying form my own account.

So I would like to hear how these different payment options (from my original post), will affect my filing and why, and the best way to go about it.

[nichole04]

I plan to file ch. 7 in April and I will be offering my 2nd mortgage settlements after bk discharge. I just got a tax refund and my lawyer advised me to put it into an IRA account and I plan on taking it out after my bk is closed to settle with the 2nd mortgages. I too wanted to settle before filing but my lawyer strongly advised me against it before the bk so I am following his advice.

[Apocalypse]

One other thing: If your payment amount helps you pass the means test, you will lose that. I can't think why it would be beneficial to do it BEFORE BK. I think you should do it after.

[Overmylimit]

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.

No no problem so far, I told the Trustee I was keeping the home. I am just waiting for the 60 days to be up.

[Overmylimit]

chime in with their experience and percentages?
2% is a nice number, but how common is it?

It's not unless you wait it out...

Ok lets do this a different way, you are right anything could happen and they might not give you the same terms later and it sounds like you don't want to take the chance, you might be right. However if the market doesn't go back up you could not give them a dime for 2-3 years after you file...2-3 years of zero..nada..and them sitting on a lien that they can't get paid for....then maybe you get your 2% you're looking for..

Your original question asks how it would effect your BK and it sounds like everyone gave the same advice so take from it what you will

As to the best way for the settlement cash...ask a rich relative would be the fastest way if you have the means although we all advised against it

[momofthree]

I have to admit that fear of the unknown is what caused us to file a chapter 13 rather than a 7. That way we were guaranteed that our 2nd goes away. We offered them a settlement of 15% before we filed. They verbally agreed to it, asked us to fax over docs to them, and then reneged on the deal. I don't trust them as far as I can throw them, so now they get nothing from us.

I'm a play-it-safe kinda gal though, and we are in a position where we are paying out 0% to unsecured debts, so the 13 isn't that big of a deal. Actually, we're paying less into our 13 than what we offered to settle for, so it actually worked out well for us....

[tightrope]

]...you are required on your forms to disclose if you have made any preferential payments. ..[/I]..

As far as I know, preferential payments apply to un-secured creditors only. Otherwise, all of your mortgage payments in excess of $600 would be "undone" to be "distributed" in BK .

Here's what the BOLD stmt means:
c) You are happy with the pymt BUT the TT isn't happy with it... and the TT undoes the transaction ....

On what grounds???

]...What you seem not to be acknowledging here is that the TT can do things that aren't conducive to your health or future. So why give them the chance[/I]..

The only negative I see so far is that, depending on the source and how it's handled, trustee may require that the settlement amount be counted as part of income.
And as you said, if the money is paid directly to the bank, I may not even have to include it in the income.

]...another Ch 7 filer who had their 2nd mtg discharged by the Ch 7 filing, and after a couple of yrs the 2nd has offered to settle for 2% of the principal balance owed on the loan. Are you anywhere that number on your pre-Bk negotiations? Didn't think so..

Others may not care, but I'm not willing to have this weight around my neck for 2 years or even 6 months. So, if I'm happy (key word) with it, I'll take it.

And as far as settling their 2nd before vs after Ch7, could those who actually done so chime in with their experience and percentages?
2% is a nice number, but how common is it?

[blessed]

Can we at least talk you in to wearing your seat belt when you drive into that wall? Is it the same wall that Mensa et al are talking to?

I like that analogy Mensa. lol

[Mensa1]

Hey tichtrope; I just read somewhere that another Ch 7 filer who had their 2nd mtg discharged by the Ch 7 filing, and after a couple of yrs the 2nd has offered to settle for 2% of the principal balance owed on the loan. Are you anywhere that number on your pre-Bk negotiations? Didn't think so.

But this should give you an idea of the mindset of the 2nd mtg lender. After the Bk filing and the borrower is discharged, and the house is under h2o, the lender is skrewed BIG TIME. They have a charge off with little value, nothing more.

[albacore44]

If your so intent on setteling pre BK, then i would give up planning to file. As others have told you, you are required on your forms to disclose if you have made any preferential payments. so if you have one the trustee will ask for an equal amount from you to distribute amongst your other creditors. i just had my 341 meeting, and the trustee was asking that direct question. so unless your willing to perjur yourself in front of the trustee, plan on this settlement costing you double.

[Mensa1]

Here's what the BOLD stmt means:

c) You are happy with the pymt BUT the TT isn't happy with it... and the TT undoes the transaction and disallows your discharge or requires you to pay to the "TT the amount of the settlement.

How you feeling now... besides very much NOT happy.

What you seem not to be acknowledging here is that the TT can do things that aren't conducive to your health or future. So why give them the chance.

The correct answer to this puzzle, as has been eluded to by quite a number of posters, is to WAIT until after discharge, then: 1) the mtg holder will be more motivated since their only recourse is to a 2nd mtg which is worthless, 2) TT will be out of the picture and whatever happens, happens without recourse, 3( tightrope will be so happy with the settlement number that the grin on his face won't fit inside the front door all in one trip.

[tightrope]

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

The REASON would be a) me being happy with settlement amount and b) since I would be happy with it now, then why would I want to jeopardize the settlement in the future, as no one can be sure how they would act/react after BK.
Of course, if someone on here is willing to guarantee the same settlement amount following the BK, by placing it in an escrow account, I'm willing to postpone settling.

And what exactly does that bold statement mean?