Which to do 1st?

[ediev]

Yes this is something that you need to look at very closely if you need the mortgage (over mean income). It's not the same across all courts... and this is where research and having a GOOD attorney that knows your local rulings will help a ton.

In our area you can use the mortgage on a house that you are surrendering. But it does have to be reasonable and not a million dollar house and your making 300k a year.... cause they can and will hit you with a totality of circumstance argument on a theoretical forward looking means test on your ability to fun a chapter 13 AFTER you have surrendered the secured debt.

Point taken - million dollar house - LOL- not here - $300K (not even close -not yet anyways - i can dream of the future, right? ) Currently I don't think any trustee would blink an eye (knocking on wood). We truly don't make a lot, live a humble life (house/cars/expenses), and our CC usage I don't feel is questionable in regards to amount/frequency/type of use. Just gotten ourselves into a bit of a bind and could really use a fresh start.

[DebtStinks]

Hmmm.....well we are currently pretty below the median (fortunately?)...however don't they allow you to use some kind of average rent payment for the area? Or are you just saying i won't be able to use my current mortgage payment? (Average rent will suffice - "ZERO rent will NOT!)

Means test really only comes into play if you are above median income or if you schedules show significant income regardless of income. You might want to just play around with the means test to get a better idea of how things work. Try this means test wizard that I wrote when messing around with our bankruptcy:

http://www.johnfire.com/meanstest/wizard.php

** I haven't updated the IRS data but it should still be within a couple of percent.

[DebtStinks]

We're underwater with our house about the same amt - about $325,000 in mortgage debt and house would probably sell somewhere around $150,000+-

Someone else mentioned that if you do not want to keep the house, they will allow an additional wild card exemption. I thought in Florida, where I am - they only allow a total $1,000 exemption for each person...I'm getting a little confused about this and will definitely speak to my attorney-but not before next week (I'm so impatient - not to mention I will judge his reply based on the info i receive here - is that bad?). If I was able to save AND exempt $20K - I would definitely hold off on filing BK. My only rush is so that I can get it out of the way in order to save my money while I wait for the foreclosure to go through.

http://www.thebankruptcysite.org/exemptions/florida.html

From what I see above FL exemptions pretty much suck for people that are under water on their homes. It looks to be setup to protect all the equity that you might have in your house and not much else. Only 1k for a car? Really!?!? The wildcard does look to be only 1k per person (2k for joint BK).

Learn everything you can about bankruptcy THEN start hitting the free consultations with some lawyers. You will quickly find that YOU know more about bankruptcy than some of these lawyers. It seems that many lawyers are just hiring paralegals that know bankruptcy and having them do most of the work so they can capitalize on the surge in filings. Run, don't walk, from places like this.

[ediev]

Another thing to consider is if it appears obvious to the trustee that you are letting the house go - Quit making payments; Get foreclosed; or don't "intend to Re-affirm" - You probably won't be allowed to use your mortgage payment on the means test. If you are very low income, this might not matter. But if you are anywhere near the median it could be a problem.

Hmmm.....well we are currently pretty below the median (fortunately?)...however don't they allow you to use some kind of average rent payment for the area? Or are you just saying i won't be able to use my curren't mortgage payment? (Average rent will suffice - "ZERO rent will NOT!)

[ediev]

How underwater are you? Loan amounts & home value?

My wife and I were in a similar situation. Our house is WAY underwater... owe $365k and it's worth like $120k. My wife is a teacher and I run a business that ended up folding. Things were a mess and our only way to pull off a chapter 7 is while I am between jobs/businesses. Our emergency savings was empty and credit card balances were growing every month to cover our expenses. We had not missed a single payment when we decided that a chapter 7 was our only out.

You just need to be strategic in your filing. Income is one of the big areas that you need to watch for as it will make or break your case. We were over the mean income but could easily pass the means test due to the secured debt (mostly home). So first things is you must really sit down and get your last 6 month of income down on paper (or excel). Then forecast out what you think you income is going to be over the next year or so. Be aggressive and put down the best case scenario. Then just calculate out the rolling 6 month average and see at what point you guys will go over on income. If you have a nice cushion now then it makes it easier. You just need to be ready to file. Income is based on the previous 6 months so if your income takes a sharp turn up some month... all you have to do is file before month end and the income for that month doesn't count. But you have to be ready.

So what we did was just stop paying all credit cards and mortgage and put that money into savings. We used some to pay our attorney, fix up the car that had been needing help, got the kids to the dentist, other necessary things that are ok use of money prior to a bankruptcy. It depends on your state exemptions but at this point you need to watch your savings. At some point your savings will grow to the point that you can't cover it in exemptions. In CA if you don't need to protect a house you get a ~$20k wildcard that can be used for anything. We used most to protect the equity in our one good card and some savings. But you will have to see how your state works on exemptions. We stopped paying all our bills in March 2009 and filed at the beginning of June 2009 as we were capped on what we could exempt (which happens pretty quick). But once you file thats your income snapshot that is used by the courts. After you file you can just start saving without being affected by exemptions.

The mortgage companies were calling every day saying they were going to take the house if we don't pay now. Once we filed back in June we haven't heard a word from them. They didn't life the stay and they have yet to file a NOD. We continue to live here rent free until they decide to kick us out.

Be sure to get a good attorney that will be able to work with you over time to be sure you are ready to go when needed.

We're underwater with our house about the same amt - about $325,000 in mortgage debt and house would probably sell somewhere around $150,000+-

Someone else mentioned that if you do not want to keep the house, they will allow an additional wild card expemtion. I thought in Florida, where I am - they only allow a total $1,000 exemption for each person...I'm getting a little confused about this and will definately speak to my attorney-but not before next week (i'm so impatient - not to mention I will judge his reply based on the info i recieve here - is that bad?). If I was able to save AND exempt $20K - I would definately hold off on filing BK. My only rush is so that I can get it out of the way in order to save my money while I wait for the foreclosure to go through.

[ediev]

WOW - truly poetic and I can see you really understand our struggles. I myself do not have issue putting aside all emotions...my husband on the other hand struggles with the whole thing. The ultimate worry wart. Perhaps it is because I'm the one who researches and reads obsessively? Although, that could do the opposite should someone not be able to wade through the confliciting info out there. Regardless, I will give him your post to read. Sleep well tonight knowing this post will make at least one other person have a peaceful night's sleep Thank you so much!

[ediev]

Last payment on FL home Jan. 09
Filed March 09- indicated "surrender" in filing
Bank filed for Relief of Stay in June.
Then nothing for a while.
Got a Summary Judgement about a month ago.
As you can see, it takes a long time in FL.

We filed early on because I couldn't live with the possibility of a deficiency hanging over my head for 5 years. Had to relieve the stress. I'll rebuild our credit, but needed to keep my sanity intact.

Best Wishes

Thanks for the best wishes - we like you, have agreed that a price cannot be put on sanity...no matter what score my credit will have...it's only a number...a computer generated number will not rule my life (<---2010 mantra)

[ediev]

Are you current on the 1st mortgage?
Well we've been in a trial payment plan with 1st for 5 months - did not send the January payment - so i guess, no?

Your plan of attack could work, I believe. One factor is this: If you file CH 7, you will be asked if you intend to keep the home or surrender. You may want to indicate "Keep the home" but not sign a reaffirmation. Here is my thinking: If you indicate that you want to abandon the home, then try to draw out the foreclosure process, a wily attorney may find a way to use this against you. I cannot say if this has been a concern in the past, but I think it may become one soon, since there are so many bk's and foreclosures.

Very, very interesting, I will certainly discuss this with my attorneys.

Another factor comes into play though. In FL you can claim the wildcard exemption, but only if surrendering the home. That may be an issue depending on how many nonexempt assets you have and their value.

You know, I did not know there was a wildcard in FL - how much is it? Can you tell me more on how this works?

In my own case, filing seems to have had no effect at all on the foreclosure process. Like you, I operate a business that utilizes only my talent and continues to be my sole source of income. Trustee did as you suggest in your post, and had zero interest in it.

Good news!

Generally, the foreclosure process will proceed at its own pace and is not connected to the BK case, except that a lender has to file for relief before proceeding. Even if they DO file for relief, that doesn't always mean they are going to move ahead with the foreclosure.

Florida seems incredibly slow right now, for BoA, in terms of foreclosures.

I am dealing with BOA w/ the 1st & this is what i hear - but the "unknown" is so scary isn't it?

In your shoes, I would file 7 now. If you don't need the wildcard, I would indicate you want to keep the home, then not sign reaff papers. You probably wouldn't be allowed to anyway, but the intent is what may be important later.

Don't think I will need the wildcard - and yes, this sounds like a great idea!

When the NOD does arrive, from the 1st, I would answer it and fight it. You may have more time than you think, anyway. We haven't paid the mortgage in over a year, in the Tampa area.

The NOD was filed in Nov. However, they didn't ask for relief from the automatic stay in our CH 7. We hope they move fast, but it looks like BoA is stalling.

Also good to hear.

[DeadManCrawling]

Hakuna and DS bring up very good points, and I would like to add my experience.


We, too, were overwhelmed with mortgage and household expenses. We took a very hard look at our largest expenditures, which were all related to the home, and did exactly as Hakuna suggests. We made a timeline graph showing our income over 6 months, and then updated it to know when was our best shot at filing CH 7. We liquidated assets we thought might be taken in the process of BK, and consulted with our attorney about how to best dispose of the money. We ended up with one non-exempt asset (a car) that turned us into an asset case. Which was fine, that removed another expense from our ledger, in terms of maintenance and insurance.

Our time to file came in December. It was preceded by two important events.

1. Our 6 month lookback was finally a couple thousand below median, on an annualized basis.

2. We were scheduled for a debtor's exam for Capital One.

We filed in December, and were under median, but surrendering the house. In our district, Florida Middle, you can claim mortgage and related expenses even if surrendering. This was a godsend and would have caused us nightmares in some districts.

Since we surrendered the car, the trustee "got something", as my attorney put it. It should not be this way, but his opinion was that our honesty about this non-exempt asset weighed in our favor with the trustee, and encouraged them to not look too deep into our overall situation.

We moved out of the home AFTER the 341. This is important because, had we moved prior, the trustee MAY have inquired about how much that changed our expenses.

And that change was drastic. We went from being in severe trouble, financially, to being profitable on the day we moved. We no longer had 7k per month in household expenses.

Now, one month or so later, my wife just paid all of our bills at the new place. After she paid them, we have $7,500 in our bank account. This number should be consistent in coming months, and eases our situation considerably. I expect to see 6-7k in excess dollars each month.

The value of planning the BK and knowing when to jump really helped us.

Some could argue, legitimately, that we probably should have been forced into a 13. But, we followed the exact letter of the law, and the way our district views BK law really benefited us.

But you have to know the law, and your specific financial concerns, in order to make it work as well as possible for you and your family.

Best,

-dmc

[DebtStinks]

Wow HakunaMatata, all of that sounds VERY similar to what my wife and I went though. We are just hanging out in our house waiting for the bank to make it's move. In the mean time we are saving and planning ahead for our future with out goal of getting back into a home while the market is still low (no huge hurry here).

The whole decision to go with a bankruptcy and foreclosure was 100% the right business decision to make. It's the emotional part of it that is hard to get over. It is such a relief to be out from under that crazy upside down mortgage. I can wake up in the morning and look forward to my day instead of dreading it. Wonderful feeling and reaffirms our decision about the bankruptcy and foreclosure.

One of the most common things I see here on the boards is people not planning ahead for their bankruptcy or simply waiting to long to make the decision. It's a huge financial move and one that you really need to understand and take control of.

[HakunaMatata]

[DebtStinks]

Another thing to consider is if it appears obvious to the trustee that you are letting the house go - Quit making payments; Get foreclosed; or don't "intend to Re-affirm" - You probably won't be allowed to use your mortgage payment on the means test. If you are very low income, this might not matter. But if you are anywhere near the median it could be a problem.

Yes this is something that you need to look at very closely if you need the mortgage (over mean income). It's not the same across all courts... and this is where research and having a GOOD attorney that knows your local rulings will help a ton.

In our area you can use the mortgage on a house that you are surrendering. But it does have to be reasonable and not a million dollar house and your making 300k a year.... cause they can and will hit you with a totality of circumstance argument on a theoretical forward looking means test on your ability to fun a chapter 13 AFTER you have surrendered the secured debt.

[BCA2009]

Exactly my concern - TODAY we will be a candidate 6 months to a year from now - perhaps not. Don't want to slow down growth because I'm waiting to file...sound counter-productive doesn't it?

Thanks so much for your thoughtful and detailed reply. Truly helped organize my thoughts.

Another thing to consider is if it appears obvious to the trustee that you are letting the house go - Quit making payments; Get foreclosed; or don't "intend to Re-affirm" - You probably won't be allowed to use your mortgage payment on the means test. If you are very low income, this might not matter. But if you are anywhere near the median it could be a problem.

[DebtStinks]

How underwater are you? Loan amounts & home value?

My wife and I were in a similar situation. Our house is WAY underwater... owe $365k and it's worth like $120k. My wife is a teacher and I run a business that ended up folding. Things were a mess and our only way to pull off a chapter 7 is while I am between jobs/businesses. Our emergency savings was empty and credit card balances were growing every month to cover our expenses. We had not missed a single payment when we decided that a chapter 7 was our only out.

You just need to be strategic in your filing. Income is one of the big areas that you need to watch for as it will make or break your case. We were over the mean income but could easily pass the means test due to the secured debt (mostly home). So first things is you must really sit down and get your last 6 month of income down on paper (or excel). Then forecast out what you think you income is going to be over the next year or so. Be aggressive and put down the best case scenario. Then just calculate out the rolling 6 month average and see at what point you guys will go over on income. If you have a nice cushion now then it makes it easier. You just need to be ready to file. Income is based on the previous 6 months so if your income takes a sharp turn up some month... all you have to do is file before month end and the income for that month doesn't count. But you have to be ready.

So what we did was just stop paying all credit cards and mortgage and put that money into savings. We used some to pay our attorney, fix up the car that had been needing help, got the kids to the dentist, other necessary things that are ok use of money prior to a bankruptcy. It depends on your state exemptions but at this point you need to watch your savings. At some point your savings will grow to the point that you can't cover it in exemptions. In CA if you don't need to protect a house you get a ~$20k wildcard that can be used for anything. We used most to protect the equity in our one good card and some savings. But you will have to see how your state works on exemptions. We stopped paying all our bills in March 2009 and filed at the beginning of June 2009 as we were capped on what we could exempt (which happens pretty quick). But once you file thats your income snapshot that is used by the courts. After you file you can just start saving without being affected by exemptions.

The mortgage companies were calling every day saying they were going to take the house if we don't pay now. Once we filed back in June we haven't heard a word from them. They didn't life the stay and they have yet to file a NOD. We continue to live here rent free until they decide to kick us out.

Be sure to get a good attorney that will be able to work with you over time to be sure you are ready to go when needed.

[ediev]

Filing BK won't likely speed up a foreclosure process. In fact, filing can delay foreclosure. Once you've filed, you're protected by the Automatic Stay. A secured creditor can file a motion for Relief from the Automatic Stay; although, this doesn't always occur.

We have many posters who have not attempted to fight foreclosure and have managed to remain in their homes for 1+ year. There are plenty of factors contributing to the length of time the foreclosure process will take including State foreclosure laws, local housing market conditions, lender, etc.

Biggest concern is there seems to be no rhyme or reason to their decision. The only thing we can do is get our ducks in a row, plan for the worst and hope for the best. Based on my findings, seems like people are having an equally hard time for the banks to just foreclose so they can move on! In my case, I'd like them to take their time for a while anyways. 2 years from now, this will not be the case.

Are you dealing with real estate attorneys or BK attorneys? Neither should encourage you to "hide" funds if your ultimate intention is to file BK.

I am dealing with both - one who specializes in mortgage defense and another who specializes in BK. I will ask them both these questions and will let everyone know exactly what they "legally advise". And no - neither suggested this to me - we would not consider it - we're too scared.

Do you have significant debt (aside from your mortgages)? Deficiency judgments aren't always pursued. Depending on your circumstances and level of comfort, strict foreclosure may be an option for you.

"Significan debt" is a bit relative...but I would say "no" i.e. <$25,000 (not including mortgage debt - that's the whopper). I know what you are saying about deficiency judgements - but 3 things factor into this decision for me...1) Not comfortable with this hanging over my head - not at all. 2)Going to foreclose anyways - which will greatly hurt my credit - might as well throw in the BK too! 3) Pay attention to this one - don't know if it will happen - but I personally know lawyers who have talked about how soon it is going to be a profitable business for them to focus on pursuing deficiencies - something like this: "hello bank, I'm a lawyer, I want to collect your deficiencies for a small commission...if I can collect, you get some money you'd never have..." What does it cost the bank - nada! This is a scary concept to me.

If you're truly heading down the BK path, you have to decide when to best initiate your "fresh start". If delaying filing will impede income/savings growth, you may wish to file sooner. Familiarizing yourself with your State exemptions and Means Test should be helpful tools in assessing your potential BK timeline. You want to ensure your a C7 candidate and any assets you possess are protected.

Exactly my concern - TODAY we will be a candidate 6 months to a year from now - perhaps not. Don't want to slow down growth because I'm waiting to file...sound counter-productive doesn't it?

Thanks so much for your thoughtful and detailed reply. Truly helped organize my thoughts.