Not sure what to do

[Runnin on empty]

I apologize in advance for the length of this post. I also apologize if the answers were here on the board elsewhere, I did a few searches, but couldn't find a definitive answer.

Well, as my screen name states, I am Runnin' On Empty...Stopped in at the CU today as a last-ditch effort to yet again re-consolidate the debt. I knew we owed a lot, but actually hearing it and seeing it written out in front of me was a real "wake up and smell the coffee" moment. Thankfully, the CU representative who was working with us had been divorced and was working 2 jobs to pay her bills down (ie - she was a real person instead of a bank drone who only looks at the numbers and speaks in a demeaning tone).

Long story short, about the only way we could do anything would be to win the lottery. Seeing as I'm fresh out of magic dust, I don't see that happening anytime soon.

I've always been one to scoff at the idea of bankruptcy. Not that I looked down on it, but more of a "I made my bed, I better lay in it" sorta way. That is, until recently. I've come to the realization that I have a problem. I am a compulsive spender/shopper, or however you want to term it. I believe that most of it stems from low self esteem starting from my father verbally and mentally abusing me as a child. I won't use it as a crutch however, I made these debts, sickness or not, and one way or another, I've got to accountability for them.

As we were driving home, I mentioned to my wife that even if we had 0% on each one of our debts, it would take us over 10 years to pay it off, and that isn't including the house. I've got 2 kids, I'm not getting any younger, I'd like to think about the possibility of retirement someday.

I will be the first to admit that we've lived life a bit too high on the hog. My snap decision spending has led us to over $100K in unsecured debt (mostly the plastic monster), and another $40+K for the house and remnants of my student loans.

I'm tired. I've been working 2 full-time jobs for over 5 years, and at one point, for over a year straight, I was working 7 days a week. My wife also works a full-time job, and with the 3 full-time incomes, we're just a hair over the Census Bureau's Median range for a 3 person family (my oldest lives primarily with his mother). I have 2 jobs that I absolutely cannot stand, and each day it is a momentous task to just get myself ready for the long 14-16 hour day ahead. My relationships with the kids and wife are suffering too, and nothing on this earth is worth losing them.

I've pretty much all but decided that the thing we need to do is file for bankruptcy, but I am not sure which route to go, or how it will affect us. That being said, I have the following questions...

1 - I am considering the Chapter 13 as a possibility as it would allow me to repay back some of the debt. I have read online that it usually ranges from 75 to 50 cents on the dollar for every dollar owed. Even if it is decided at 50 cents, that still leaves quite a bit of excess debt out there. Do they ever do more than 50 cents on the dollar? Say 25 or 30 cents? At least this way I would feel that I was giving back something.

2 - We own a home that we purchased for $30K (foreclosure). We have lived here for about 3 years and have very little actual equity in it. It has a market value of around $60K and we have also taken out a HELOC for $30K on it that has gone to consolidate other credit cards. If we file Chapter 7, will they take it from us?

3 - One thing I would really like to do is get back to college and earn my Master's Degree, so that I can find a better job and better provide for the family. How will colleges and the Federal student loan people look at this?

4 - My wife and I have excellent credit. Too good as a matter of fact. Will this look favorably upon us if we do go to file, the fact that we have always paid the bills first, even if it was only the minimum?

5 - Considering my wife and I are just over the median income for NY with the 3 full-time jobs (and quite a bit under it with only 2 full-time jobs), how will they look at our possessions? While I definitely agree that some of it should go, there are things that I did purchase on my own long ago that I would be devastated if I had to sell them.

Thanks in advance...

[FilingOnMyOwn]

1 - I am considering the Chapter 13 as a possibility as it would allow me to repay back some of the debt. I have read online that it usually ranges from 75 to 50 cents on the dollar for every dollar owed. Even if it is decided at 50 cents, that still leaves quite a bit of excess debt out there. Do they ever do more than 50 cents on the dollar? Say 25 or 30 cents? At least this way I would feel that I was giving back something.

A chapter 13 usually ranges from 25 to 100%. I would try to get into a chapter 7.

2 - We own a home that we purchased for $30K (foreclosure). We have lived here for about 3 years and have very little actual equity in it. It has a market value of around $60K and we have also taken out a HELOC for $30K on it that has gone to consolidate other credit cards. If we file Chapter 7, will they take it from us?

You can USUALLY reaffirm a debt like that, so you can continue payments normally as if you never would have filed. However not all lenders are always willing to participate, and you really need to consult with attorneys in your situation, its not a case you go consider going pro-se.

3 - One thing I would really like to do is get back to college and earn my Master's Degree, so that I can find a better job and better provide for the family. How will colleges and the Federal student loan people look at this?

Colleges don't care if you filed bankruptcy. Lenders do. As a general guideline, roughly half of all lenders will decline you with a bk on your record for 7 years.

4 - My wife and I have excellent credit. Too good as a matter of fact. Will this look favorably upon us if we do go to file, the fact that we have always paid the bills first, even if it was only the minimum?

Don't worry about it. Your credit score won't have anything to do with anything if you file.

5 - Considering my wife and I are just over the median income for NY with the 3 full-time jobs (and quite a bit under it with only 2 full-time jobs), how will they look at our possessions? While I definitely agree that some of it should go, there are things that I did purchase on my own long ago that I would be devastated if I had to sell them.

You may lose property in a chapter 7, if it has LOTS of value. Being slightly over the exemptions is usually not a big deal. You have to weigh out whether you want to be in a chapter 13 for years, paying back between 25-100k, or if your stuff is even worth 25k and you'd rather just take the risk of losing it and buying new stuff back later for less than you would repay otherwise. And its always possible that you could keep alot of it, most, or even all.

And if you're over the median income, one of you would probably have to quit one of your jobs, and simply stop paying on the unsecured debts (credit cards)... And thats IF you are positive you will be filing chapter 7. You still need to pay on your home and autos.

Its time for you to start getting free attorney consultations, if you think you need a way out. Take each one with a grain of salt, until you find one that you feel is genuinely honest and experienced. Then you decide for yourself what to do.

[SinkingFast]

FOMO gave you lots of good information. FOMO's suggestion to quit working 1 job would definitely put you on the safe side of the Median, but,...........

There's some flexibility to the Means Test and the Median Income. If you have Secured payments such as your mortgage, you'll get to take the excess/mo in addition to the Schedules Allowable for your County. Same with cars. If your car payments are more, you'll get to deduct the excess. You have a child living with your Ex. If you make Child Support payments to your Ex, you'll get to deduct those $$$'s as well.

Before you do anything, schedule some Consults, 2-3, with attnys that specialize in BK. Get a feel for what you're looking at. Each attny you visit will give you their take on how to approach your particular situation.

Some attnys won't take in any case as a Ch 7 where the filers are over the Median. Flat out, just won't do it. Some attnys won't give you an opinion until they crunch the numbers and see exactly where you land. A lot depends on the Court where you file. The Local Rules.

Here's a link for you:

http://www.usdoj.gov/ust/

Upper right is a box about BK Reform. You'll find the Means Test info, a listing of approved Credit Counseling Agencies, and other information about BK Reform.

[CAB_44]

Hey Runnin on empty~
I am looking at a 100% payback~ but that's because we are well over the median for OK and we have decent incomes....
If there is any way possible for you to do a Chap 7 ~ GO FOR IT MAN!!!!!!!!
I wish I could~
I read your post, and I have a lot of the same feelings~ paying back the debt etc. etc...
but with already paying my a** off on these cards for years, and years, and not getting any where with it, if I could do a Chap 7, I would at this point....look at all of the interest you've paid for years....they've nearly got their paybacks .....plus some~
Be done with it and file a 7 if at all possible~ Get ON WITH YOUR LIFE!!!!!!!!!!!!!!

[Runnin on empty]

Thanks for the replies everyone. Sorry for taking so long to respond, wife and I went on vacation. I felt very guilty being gone considering we're looking at BK as an option, but I needed the break, I've been working myself to death (sadly, this is almost literally).

I will be contacting some lawyers this week to interview and go from there, but I do have a few more general questions:

You can USUALLY reaffirm a debt like that, so you can continue payments normally as if you never would have filed. However not all lenders are always willing to participate, and you really need to consult with attorneys in your situation, its not a case you go consider going pro-se.

I understand the reaffirm on the original mortgage, but will we also need to reaffirm the HELOC as well? If we don't reaffirm the HELOC, will we be at risk to lose the house?

Without going into huge details, we do have some loose ends that we would like to take care of before officially starting the BK process. If we take care of these by using either a CC or our other revolving LOC (not tied to the house), would that be bad? I don't want to cause issues if they're going to say "Well you used one of the checks on your LOC for $5K (arbitrary number) right before you filed." If one needed to do something along those lines, would there be a "waiting period" before they could start the BK process? Basically what we plan to do is fix some major deficiencies with the house and hope that it can be done legally. If not, we would just end up doing it ourselves after everything was finished, but these are things that have been a problem for quite some time.

[Spartan]

.......look at all of the interest you've paid for years....they've nearly got their paybacks .....plus some~
Be done with it and file a 7 if at all possible~ Get ON WITH YOUR LIFE!!!!!!!!!!!!!!

I kind of feeling exactly the same way. The cc are not losing anything. They have made the money back plus a hefty profit already, due to me paying exorbitant interest for several years before I tapped out....

Come to think of it... may be that is why most of the cc don't bother to sue...

[CAB_44]

I kind of feeling exactly the same way. The cc are not losing anything. They have made the money back plus a hefty profit already, due to me paying exorbitant interest for several years before I tapped out....

Come to think of it... may be that is why most of the cc don't bother to sue...

by golly goerge...I think he's GOT it!!!!!! (in a british accent......)
TRUE TRUE TRUE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!

[Runnin on empty]

Okay...I've been giving this some more thought, and now I'm not so sure that BK is the way for us to go. Of course, I will consult with a few attorneys before making the final decision, but let me think out loud here for a minute...Feel free to add opinions, thoughts, ect...

Secured debt is not dismissible in Ch 7 - that means we would have this:
(all numbers are approximates, give or take a few grand either way)

Mortgage: $30K
2nd Mortgage (LOC): $30K
Remnants of my college loans: $10K
My car: $4K (we owe slightly more than it is worth)

So we're looking at about $75K there...

Unsecured debt that is dismissible in Ch 7

Consolidation loan: $35K
CC: $8K
CC2: $8K
LORC (not tied to the house): $8K

That's right about $60K there....

$135K total....Jeez, what the heck were we thinking (or why weren't we thinking...)?

To me, it almost seems like filing would not be worth it. Since we cannot lose the house, and the 2nd mortgage cannot be discharged on a BK, I think we may have no choice but to tough it out and pay it all off. I mean, yes, $135K is a heckuva lot more than $75K, but is the "black mark" on our credit worth $60K-90K in debt? The one good thing is that if we decided to sell the house, the proceeds would probably be enough to pay off the mortgage and the 2nd mortgage at the same time, if not almost all of it.

Am I even in the ballpark with my thinking.....I don't know. This is the hardest decision I've ever made, and it will likely dominate my future for the next decade or longer, so I don't want to go down the wrong path....

[SinkingFast]

Actually, out of your whole list, probably the only thing that you could not get rid of in BK is the Student Loan debt.

True, you do not discharge Secured Debts. But you do discharge the deficiency balances on Secureds. If your house and/or car sell for less than what you owe, the difference would be discharged by BK.

If you wanted to walk away from your house and find a cheaper place to rent, you could do that. If you wanted to voluntarily surrender your car, you could do that. BK will discharge the deficiency balances that might result when the house and/or car are sold by the Lenders.

If you reaffirm your primary mortgage and do not reaffirm the HELOC you could risk loosing your house. Ride Thru is not allowed under New Law but some Local Courts are still doing it. You'll have to check in your area what the Local Rules are.

Mortgage Lenders are not in the business of owning houses. They are in the business of loaning money for people to purchase houses. As long as you remain current on the HELOC with your payments paid on time, the 2nd mortgage Lender probably won't move to do anything.

Also,........ IF you're allowed to Ride Thru on the 2nd, and you ever get behind, the HELOC Lender could force a Foreclosure of the property. The 2nd would get paid all they are owed and the remainder would go to the Primary mortgage Lender. If you chose to reaffirm your 1st during your BK, then you'd be responsible for the deficiency balance, if any, when the house is sold at Foreclosure.

[Runnin on empty]

Actually, out of your whole list, probably the only thing that you could not get rid of in BK is the Student Loan debt.

True, you do not discharge Secured Debts. But you do discharge the deficiency balances on Secureds. If your house and/or car sell for less than what you owe, the difference would be discharged by BK.

If you wanted to walk away from your house and find a cheaper place to rent, you could do that. If you wanted to voluntarily surrender your car, you could do that. BK will discharge the deficiency balances that might result when the house and/or car are sold by the Lenders.

If you reaffirm your primary mortgage and do not reaffirm the HELOC you could risk loosing your house. Ride Thru is not allowed under New Law but some Local Courts are still doing it. You'll have to check in your area what the Local Rules are.

Mortgage Lenders are not in the business of owning houses. They are in the business of loaning money for people to purchase houses. As long as you remain current on the HELOC with your payments paid on time, the 2nd mortgage Lender probably won't move to do anything.

Also,........ IF you're allowed to Ride Thru on the 2nd, and you ever get behind, the HELOC Lender could force a Foreclosure of the property. The 2nd would get paid all they are owed and the remainder would go to the Primary mortgage Lender. If you chose to reaffirm your 1st during your BK, then you'd be responsible for the deficiency balance, if any, when the house is sold at Foreclosure.

Thanks for the quick response.

Walking away from our house is not an option. We won't find anything cheaper than it (we actually paid $29K for it and owe about $27K - it was...oddly enough, a foreclosure ), and my wife is adamant about staying there as it is right next-door to her parents. I think there is a part of her that doesn't want anyone to know about this, and us having to sell the house like that would definitely be a dead giveaway. I'm not proud of the mess we're in, and I'm not screaming it from the rooftops, but I'm not purposely hiding anything either.

I assume ride thru is when you reaffirm your primary mortgage but not the second one?

So basically it looks as though I have one question for any perspective lawyer....If we file and reaffirm the mortgage but do not reaffirm the 2nd mortgage, will we lose the house?

One more dumb question and then I'll be quiet until I speak with a lawyer...Is it that if someone has more than $100 disposable income a month that they will be forced into a Ch 13 instead of a Ch 7? If that is the case, then we need to determine if filing is going to work for us.

[SinkingFast]

Actually, under New Law, you have to Redeem (pay what you owe in full), Reaffirm (continue paying as agreed in the original contract), or Surrender (return the asset to the Lender).

Old Law used to allow for Ride Through. You do none of the above, but continue paying payments as agreed in the original contract. New Law does not allow for Ride Thru. Which is basically what you are wanting to do with your HELOC.

Some Courts, however, are still allowing for Ride Thru. You're gonna have to ask attnys what the Local Rules are for your area. May be, you live in a District that is not allowing Ride Thru. May be you are. You'll just have to ask.

Whether or not you can Ride Thru will impact your whole game plan on what you want to do. And you won't know how to plan until you know what the Local Rules are.

If you chose to surrender the house to the Lender, you wouldn't be the one selling it. The Lender would either have to agree to accept a Deed In Lieu of Foreclosure from you, or the Lender would Foreclose. Then the Sheriff would be selling the house on the Court House steps, so to speak.

[Runnin on empty]

Actually, under New Law, you have to Redeem (pay what you owe in full), Reaffirm (continue paying as agreed in the original contract), or Surrender (return the asset to the Lender).

Old Law used to allow for Ride Through. You do none of the above, but continue paying payments as agreed in the original contract. New Law does not allow for Ride Thru. Which is basically what you are wanting to do with your HELOC.

Some Courts, however, are still allowing for Ride Thru. You're gonna have to ask attnys what the Local Rules are for your area. May be, you live in a District that is not allowing Ride Thru. May be you are. You'll just have to ask.

Whether or not you can Ride Thru will impact your whole game plan on what you want to do. And you won't know how to plan until you know what the Local Rules are.

If you chose to surrender the house to the Lender, you wouldn't be the one selling it. The Lender would either have to agree to accept a Deed In Lieu of Foreclosure from you, or the Lender would Foreclose. Then the Sheriff would be selling the house on the Court House steps, so to speak.

Again, thanks for the fast response. I'm going to call the lawyer tonight in-between both jobs to ask about Ride Through and my county/state. Depending on their response will determine what we decide to do.

[Boscoe]

So, Sinking Fast, just surrending the house or car isn't the end of it? In other words, a deficiency judgment is still possible on the asset after the lender forecloses and sells it? I thought the bk took care of ALL of the secured portion and the only thing the lender could object to in a discharge was any unsecured portion (i.e. loan balance exceeded the asset value)?

Obviously, if no issues with objections, i.e. fraud or abuse, then no issue at all. But if there is one.......?????? Please clarify.