To Pay or not to pay?

[lomarikian]

Hi, this is my first post. Cutting to the bottom line....we are in foreclosure as of April 5. 2010. We want to stay in our home. We are self-employed in California with a fluctuating income. We fell behind. Mortgage company wanted $6010 by April 30 which included Jan-April payments plus legal fees. We only had $5000. So we sent Jan-April payments ($4650 from tax refund monies) along with a request for loan mod and HAMP consideration. Now its May 6 and they want $9000. Long story short it took approximately 7 phone calls to try and understand what they want and why and how much. It seems the target amount keeps moving. Its really frustrating and scary because we are afraid they will find reasons for us to pay even more. They told us Monday we only had to come up with $1350 more to cure default and then everything would be fine. Now 3 days later new info is that they gave us wrong information and the new amount is $2100 legal fees + $725 escrow fees + May payment. Why the escrow fees? They said all of a sudden we are short.

Now they are returning all funds that we paid (Jan-April pymnts). So at this point I am worried that we can't come up with $9000 before May 21 and they will up the amount again, virtually guaranteeing that we won't be able to afford May and June payment. They told us today that there is only a very slim chance that we will even qualify for any loan mod. I have been all over the internet and phone talking with people to get suggestions for help....I have had two sources tell me not to pay any money at this point. But to concentrate on getting all requested accurate info to mortgage company and wait for the decision on loan mod. Then make payments. But isn't that risking the higher fees and foreclosure?
Anyway, we don't know what to do. We realize that the servicers are just money pitbulls. But should we just suck it up and try to come up with $9000 by May 21 (we have about $7000 now with returned pymnts) which would clean us out and then we may not be able to pay June pyment (or anything else for that matter). Or take advice and hold out for mod which may never happen? They (mtg servicer) told us today that they will not do any forbearance of principal.
I hope this makes sense. Thx for listening. Has anyone had any experience like this? Any suggestions?

[MSbklawyer]

Any suggestions?

Yes, Chapter 13. One of the primary purposes of that chapter is to allow people to cure arrearages on secured debts and keep the collateral. This assumes, however, that your finances are stable enough to allow you to make the ongoing payments consistently and regularly. Don't spend the payments that they sent you back, use that for your attorney fees.

[lomarikian]

Thank you for the feedback.
Well, its a few days later and I have contacted a couple of attorney's. The suggestion is to file Chapter 7--.

I have received some advice and wanted to run it past the forum. Once again we are in the foreclosure process as of April 5th. We want to keep our home.
I had already submitted a loan mod request on April 30. One BK attorney said to retract my file and wait 30 days. Then re-submit it. This may have been because of the new HAMP rules that will apply to BK filers as of June. I am not clear on this suggestion.

Alternatively, I was advised to do the loan mod first and then file BK.
Both sources say to keep our money.

Today the mortgage company is only requesting $6953 versus last weeks $9000 estimate to get home out of foreclosure. It is tempting to get caught up thru May and get the mortgage servicer off our backs and try to get back on track. I still don't know whether to Pay or Not to Pay the mortgage company. This price they say , is only good until May 21. What does filing BK do for our foreclosure situation financially. Will we have to pay even more if the loan mods/HAMP don't go thru. I mean we won't have any CC bills (which we are not paying anyway), but we may not have enough money to catch up our late mortgage payments either if I pay it out in lawyer fees. I can only imagine what we would owe AHMSI in another 60-90 days...... I think I am confused. Please help...

[shark66]

Well, you can't file a Ch. 7 (and keep the house) if you're behind on your mortgage payments. That you can do in a Chapter 13.

Do a little more reading on this forum, do the means test and see whether you'd qualify for Ch. 7 (without the "presumption of abuse") in the first place.

Play with numbers. See where you stand. What your priorities are.

Because in all honesty, it's all about priorities. The rest - at least in my book - is a numbers game.

You may even be in a situation where you could file "pro se" and save money on fees, but you've got to know what you're doing, cross your Ts and dot the is a zillion times before actually filing. And you still may make a mistake somewhere.

Not that having an attorney is a guarantee against a mistake being made. I've read quite a few posts around here pointing in the opposite direction...

Good luck.

[pileated]

Whatever you do, think carefully before you make debt payments.

There is no sense in paying bills to fend off the inevitable. It is important to face the situation at hand squarely, so that you can predict the inevitable before it occurs, so that you can plan for it.

Here is our experience, in which my husband thought he was being optimistic, but was actually in denial:

#1 My husband paid credit card bills because he could no longer stand all the companies calling him every day. It was a waste of a lot of money and entirely predictable that he would end up having to file chapter 7.

#2 My husband paid an extra 2 mortgage payments, even though it was inevitable that we would lose the house. He was hoping that his ship would come in, and it was very difficult for him to face the inevitable foreclosure.

#3 We did check into mortgage modification and our lender basically would not work with us. In the end, we gave up that idea, because the modification would have had to be so significant that no lender would have accepted it.

We are self-employed, and our income has steadily dropped during 2008-present due to lost clients and sales (we have 2 businesses) directly attributable to the economy. It is now 1/3 of what it was in 2007. When I run comparative financial statements on Quicken, I can see steady decrease over 2+ years. The actual numbers were lower than our off-the-cuff estimation.

What finally caused him to face reality was that he was about to be evicted from his office space for non-payment of rent, and the total of one rent and mortgage was more money than he had made in the average month during the past year.

To get the money to move to another state which has a lower cost of living and more opportunity for work, we stopped paying all debt. Otherwise, we would have hit the wall and not had the money to move. It became a choice between not trying to pay rent, mortgage, and credit cards and being forced to live in a box on the side of the road.

So, I encourage you to make a rational assessment of your financial situation, projected forward a year. I suggest you budget low for income and high for expenses, as a cushion against unpredictable events.

It sounds like if you make the May 21 payment, and then can't make the June payment, you will be back in the same position you are in today. I don't think that makes sense, because it prolongs the agony, possibly to no advantage to you.

We had to give up our house to foreclosure because we couldn't afford to live in our state, no matter what. You may be able to do so, but you will definitely need an attorney's advice (and possibly that of an accountant) before you can move forward to the decision-making phase.

It's all in the numbers and has zero to do with feelings or hopes, optimism or pessimism. A year and a half ago, I finally wrestled the finances from my husband's 100% control, and had to force him to face facts. I did this by refusing to give him the new password to his computer until he agreed to it. Someone has to be willing to actually manage the money and to make difficult decisions based on the figures.

[AbbeyA]

Whatever you do, think carefully before you make debt payments.

There is no sense in paying bills to fend off the inevitable. It is important to face the situation at hand squarely, so that you can predict the inevitable before it occurs, so that you can plan for it.

Here is our experience, in which my husband thought he was being optimistic, but was actually in denial:

#1 My husband paid credit card bills because he could no longer stand all the companies calling him every day. It was a waste of a lot of money and entirely predictable that he would end up having to file chapter 7.

#2 My husband paid an extra 2 mortgage payments, even though it was inevitable that we would lose the house. He was hoping that his ship would come in, and it was very difficult for him to face the inevitable foreclosure.

#3 We did check into mortgage modification and our lender basically would not work with us. In the end, we gave up that idea, because the modification would have had to be so significant that no lender would have accepted it.

We are self-employed, and our income has steadily dropped during 2008-present due to lost clients and sales (we have 2 businesses) directly attributable to the economy. It is now 1/3 of what it was in 2007. When I run comparative financial statements on Quicken, I can see steady decrease over 2+ years. The actual numbers were lower than our off-the-cuff estimation.

What finally caused him to face reality was that he was about to be evicted from his office space for non-payment of rent, and the total of one rent and mortgage was more money than he had made in the average month during the past year.

To get the money to move to another state which has a lower cost of living and more opportunity for work, we stopped paying all debt. Otherwise, we would have hit the wall and not had the money to move. It became a choice between not trying to pay rent, mortgage, and credit cards and being forced to live in a box on the side of the road.

So, I encourage you to make a rational assessment of your financial situation, projected forward a year. I suggest you budget low for income and high for expenses, as a cushion against unpredictable events.

It sounds like if you make the May 21 payment, and then can't make the June payment, you will be back in the same position you are in today. I don't think that makes sense, because it prolongs the agony, possibly to no advantage to you.

We had to give up our house to foreclosure because we couldn't afford to live in our state, no matter what. You may be able to do so, but you will definitely need an attorney's advice (and possibly that of an accountant) before you can move forward to the decision-making phase.

It's all in the numbers and has zero to do with feelings or hopes, optimism or pessimism. A year and a half ago, I finally wrestled the finances from my husband's 100% control, and had to force him to face facts. I did this by refusing to give him the new password to his computer until he agreed to it. Someone has to be willing to actually manage the money and to make difficult decisions based on the figures.

You've given some really great advice - very honest and true. Sometimes we need to step back and really take things in along with the advice of others who have been through it before us. Experience counts.