First, thanks for advice on whether or not to grab 401K funds to avoid bk. Seems that is not the smart way to go about it so I won't use it as an option. I took a means test which initially didn't pass. However, I did get a quote for a refinance on my home within the past month which would increase my mortgage and grab me some equity money. After i inputted the new mortgage amount, I passed the means test with respect to qualifying for a chapter 7. I would use the equity money to assist paying off credit cards, hence no fraudelent activities from the cash. Would this be considered a suspicious activity...that is, refinancing to obtain higher mortage amount to qualify for a chapter 7? Thanks again for the quick responses...this forum is godsend!!!
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I assume that by refi, you pass the means test because your mortgage payment goes UP. You seem to be already in a precarious position with your income vs expenses, so I don't think increasing your mortgage payment is a good, long term solution. -
I am a loan officer, and if you are barely passing the means test that means that they are probably going stated income stated asset. Trust me, there are alot of unethical or even "green" people in the mortgage business who dont understand or dont care about putting people in the right loans...
Right now I am getting calls from people with fixed income trying to get out of negative amortization loans once they realized what that meant, and that is just plain wrong. This may be a good thing for you to do, and this may also be a very bad thing for you to do.
If you are doing this and investing the money into something that will increase your income or put you in a better situation in the future and not put you at a high loan to value, then it may be a good move.
If you do this, and leave yourself with no equity, and then file for a bk, you may find yourself in a situation where if you can no longer afford your home, you may be unable to sell it, and then be unable to file another bk to get rid of the deficiancy balance. Very bad thing..
Keep in mind, if your refi @ 90% Loan to value, in this market you may be at closer to 100% or more loan to value... Ask anyone who has tryed to sell their home in the last 8 months, the appraised value may not be close to what someone will be willing to buy it for. Also, unfortunately from experience, money not well planned can go really quickly.. so make sure you are working with someone who not only tells you the positive, but also the possible negatives.. then you know this person is not only thinking about how many points to charge you..Comment
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Thanks for the input...some more details to assist with my initial quesiton. I would only be refinancing a small amount...mortgage would go up approx. 200 a month. If I apply that figure into the means test, monthly disposable income goes to around $40 a month, supposedly qualifying me for a chapter 7. Also, I would still have equity in my home that would be within exemption level. WIthout the refi, I barely fail the means test and have Chapter 13 as only option.
Reading up on Chapter 13 really makes me uncomfortable with that option...though if it comes to that, I'll take it in stride. However, since there is a legal option available to me to open up the Chapter 7 BK, I'm tempted to avoid not having my finances managed for 5 years. Any thoughts?
Sidebar question: If people qualify for chapter 7 with a low disposble income per the means test (using the basic IRS standards), could they still be forced to Chapter 13 if they have ihigher income (60K?) Thanks again to everyone!!!Comment
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