Is a Chapter 7 Right for me?!?!

[moneygirl88]

Hello, I have a question on filing as I keep reading about a lot of people who are in serious consumer debt and/or mortgage debt, but I have seroius mortgage debt wtih minor consumer debt (well relative to most) so I'm not sure if bankruptyc is right for me. Here's my situation:

Own two properties for which I have three mortgages (one is a HELOC). Mortgages total about $245K. Both properties are currently rented out and neither cover all costs, so I eat about $600/month. Also Combined, I an upside by about $127 (house 1 worth $40K bought for $105K, house 2 worth about $70K bought for $120K) on the loans. Also one of my loans is set to reset soon as it is an ARM. I've been borrowing Peter to pay Paul and see no near resolution with crappy housing market and fear of increased payments. REcently I've been using credit cards to get by and am now in excess of $12K in CC Debt. Here's my concern - I have good credit (720+) and in reviewing multiple blogs, my credit card debt is far from terribe (although I think its pretty bad). On paper, I seem great right now but in reality I'm cutting corners and making all kind of sacrafices to keep that up and Know it's just going to escalate to place where things will get totally out of hand - I'd rather not wait for that day....

Now, I"m not going through a divorce, I ddidn't recently lose a love one or don't have medica bills up the wazoo. And with my good credit situatoin (again for now) and teh fact that I've manage to be able able to stay current on my mortgage payments. I just dunno if I "fit" the bankruptcy profile. My fear of judgements and tax liablity definitely make bankrtupcy seem like an "easy fix" but that doesn't mean it's the best for me, so the quesiton I have is this, Should I:

#1) Try to stick it out?
# 2) SHould I try file for bankruptcy chapter 7 (13 is not an option to you, full forgivenss is the only way it's worth it to me)
# 3) should I just walk away from my homes and take the risk with foreclosures/judgements and waht not siince my cc debt really isn't that high?

[NoMoreCards]

You need to do what is right for you.

What I would do is file BK to get out from under those houses. 127K underwater is not something I'd want on my back.

I would rather start with nothing, and work up than start with 127K in the hole.

All the best.

P.S.

# 2) SHould I try file for bankruptcy chapter 7 (13 is not an option to you, full forgivenss is the only way it's worth it to me)

You don't really get to "pick and choose" what type of bankruptcy you file. You must qualify for a CH7.

[angles]

[QUOTE=NoMoreCards;420696]You need to do what is right for you.

What I would do is file BK to get out from under those houses. 127K underwater is not something I'd want on my back.

I would rather start with nothing, and work up than start with 127K in the hole.
QUOTE]

good advice.

[tknj99]

I was in a very similar situation last year. Primary res with eqty loan - underwater about $150k and 4 rental properties with had a combined deficit of $600 per month. Ran credit up paying taxes and knew that i couldnt sustain. So i started planning for BK last January. Used up cc's, stopped paying rental prop mortgages and didnt renew any leases. Bought a newer car while credit was still good. So now have 3 rentals in foreclosure and all sold pr will shortly sell back to bank. Will be walking away from primary residence as well.
This market will take 10-15 yrs to recover (direct quote from CEO at a major housing builder - my friend works for) so you can only sustain for so long. And even if prices do recover,inflation will eat up the recovered amount. Then you get the renters that stop paying or the months where the units are empty and bamm.. its over... fortunately i didnt touch my 401k or IRA but i pondered it..
Hope that helps.. this forum has been great!

[moneygirl88]

Thanks guys, I appreciate the feedback. I have acquired an attorney and am considering filing Non-Consumer Chapter 7. I'm a little nervous about all the details that go into it. I'm about $210 under with what could be considered "non-conusmer debt" (both being rented out) but only about $50K from consumer debt, hoping it won't be issue and I am prepared to state that I'll reaffirm the debt for two rentals if need be to get everythign discharged (I am current on both, which I think is a good faith sign that I AM attempting to keep them - whether I sign the discharge papers at a later date is another question, but I have been consulting my attorney about that). Does anyone have any experience with this, it seems this type of filing is VERY Rare. My main worry is that the value of the properites are so insanely low right now, I'm curious if they would dismiss the case but they'll "feel" that I'm making may poor judgement to keep these high loans and should, isntead, file Chapter 13 where I would be able to "negotiate down the loans"????

(YES - I do realize that they can NOT force me to do a chapter 13, but the question is more can they dismiss a chap 7 non-consumer based on the fact taht they just feel it's a "poor decision" on my part. To be clear, upon discharging other consumer debts, I WOULD be able to pay these mortages on rentals without incident so it's not a matter that I coudn't afford them so much as it is just a stupid decision to keep them - Do Trustees think like that?!)

[angles]

It sounds like our situations are similar but I am not sure if I am following your math. As you know, the qualifier for non-consumer chap 7 is 51% of your total debt has to be business related. It does not matter that your houses are loosing value, non-consumer calculations use your current mortgage balances in the calculation. In addition, you mentioned using your CC to keep things afloat. Court cases have shown that if you used a CC for business it is considered a business debt, which could be factored into your non-consumer qualifying. The credit card companies don’t like that one at all.

I don’t believe that they can dismiss your BK 7 based on poor decisions. If we all made perfect decisions this site would not exist. Even if they remove the loans that amount is still business debt and you still qualify for N-C BK7. If you are concerned about being directed towards a 13, I have been down that panic road myself and after reading a ton of info about it the short answer is wont happen. Do some research about 702(b) (presumption of abuse) and N-C filings that that should help.

In our situation we are keeping a couple of rental properties that we can afford that have negative value. Our attorney did not think it would be an issue. Hope this helped.