Help - Advice needed Urgently!!!

[jrfrank]

I am officially in over my head in debt, plus I am going through a divorce all the while retaining full custody of my son. I own 2 homes, the first in my home state, which I rent out and the rent pays the mortgage, so I am fine with this loan (even has a low interest rate). The 2nd home I bought when I had to move out of state for work, and they conned me into an ARM by waiting till the day of signing the papers before telling me about it. So I refinanced to get a fixed rate, but again they conned me and when I went to sign told me that my interest would be significantly higher than originally stated. It's an 80/20 loan, and the one loan is 14%, the other is around 9%. I thought I could make the payments for a year and refi again to get a lower rate, but then the divorce hits and can no longer do it. I also have 3 credit cards maxed out, total on them is $15,000, all have new interest rates above 30% (yeah). I take home about $2,300 a month, the mortgage payment on the 2nd house alone is $1,850. The minimum payments on each of the cards are all around $200. You do the math, and you'll see why I am stressed!! What I'd like to accomplish is to leave the 1st house alone, keep collecting the rent, and keep paying the current mortgage. I'd also like to stay living in the 2nd house, but am prepared to walk away and rent a townhouse before my credit goes completely south. I cannot sell the house, because unfortunately the value of it decreased about $15,000 since I bought it 2 years ago. Is there any way that bankruptcy could help me out here? Is it possible that through chapter 13 that I can still retain the debt and pay it off, but without all the interest? I realize that it's supposed to be paid off within 5 years, and so I doubt that I could include the 2nd house, or can I?? Or would I be better off walking away from the 2nd house and the credit card debt and do a chapter 7? Or can I do chapter 7, exclude the first house, include the second house and credit cards and still be able to keep both houses? I am completely new to this whole thing so don't go too hard on me!

[lrprn]

The problem you have is that the majority of your debt is secured (the houses) so that debt won't be discharged in bankruptcy. You don't have a large amount of unsecured debt, so getting rid of it isn't likely to help free up money to put towards your houses.

To help us help you better, can you answer these questions for us? What state are you living in now? How much equity do you have in each house? How much gross income have you earned over the last six months? Are you and the ex still living together? Is the divorce final yet? Do you have other dependents besides your son? Are you still using your credit cards? Have you taken out payday loans?

To really find out what your best options are, make free consultation appointments with 3-4 bankruptcy lawyers in your area. You'll learn a great deal as you meet with each one, and afterwards you'll be better much better shape to decide what's best for you in your situation. Good luck - we're here anytime you have more questions or just need to vent.

[jrfrank]

"What state are you living in now?" North Carolina



"How much equity do you have in each house?" The first house is in Pennsylvania, and I have at the most $5,000 in equity on it. The house here in NC was appraised last year at $157,000, I owe $186,000.



"How much gross income have you earned over the last six months?" Before taxes I make $36,500 a year.



"Are you and the ex still living together?" No (thank God!), but she is on the mortgage on the NC house.



"Is the divorce final yet? " No, in NC you have to file the legal separation then wait a year before filing for divorce. We filed out separation in November last year.



"Do you have other dependents besides your son?" No



"Are you still using your credit cards?" No, they are pretty much maxed out.



" Have you taken out payday loans?" No, I haven't been that desperate yet.


I have called a few bankruptcy attorneys, but I am having trouble finding one that has evening hours. I am thinking that chapter 7 may be the way to go, I think I qualify due to my income. And I should be able to exclude the PA house from the bankruptcy because I have never missed any payments. But if I do file chapter 7, will they take the NC house away completely? If so that may not be a terrible thing, but I need to know now so that I can rent a house before my credit goes completely south. But if I can somehow keep the house, that would be great. I am willing to still pay for the house, but I cannot keep paying the crazy interest. Is there any way through bankruptcy to force them to adjust the interest rate on a mortgage? Even still, I may be better just letting the house go, because I owe so much more on it than it's worth.

[lrprn]

Depending on which of you claims your son as a dependent on their income taxes, if your ex claims your son, then the median income in North Carolina for a family of one is $34,339. If you claim him as a dependent, then for a family of two the median income is $46,066 (http://www.usdoj.gov/ust/eo/bapcpa/2...come_table.htm) You are a little over the NC median for a family of one and below it for a family of two. If you are a family of one, then you must go through the Means Test with a bk lawyer to sort out whether Ch 7 is a possibility in your case. You are carrying a huge load of secured debt....how much unsecured debt are you carrying right now?

You must be current on the payments to file Ch 7 and keep both houses - are you current on the payments on the NC house now? Also depending on your trustee, it could be tough justifying keeping both houses. With little to no equity in either house though, your trustee may not want to take on selling a house in a depressed market. Just be sure that you do not sign a reaffirmation agreement on your NC house!

Given you are so upside down on your NC house, paying back that large a mortgage on your salary is going to be a real challenge. Also given that renters can decide to leave when their lease is up, if your current renter decides to move on, you are going to be in serious trouble maintaining both mortgages if you can't find another renter immediately. Given the limited information we have, it does makes sense to consider surrendering your NC house.

Also since your divorce isn't final yet, that can make filing bankruptcy a challenge as well. Most bk lawyers will suggest not filing until the divorce is final if you can wait it out.

You need expert legal advice to sort this out. Take a day off and make your lawyer appointments during that day if you have to. It will be well worth it!

I am willing to still pay for the house, but I cannot keep paying the crazy interest. Is there any way through bankruptcy to force them to adjust the interest rate on a mortgage?

Force? No.

Time for you to sit down and work out a realistic monthly budget to see if you really can afford to keep both houses. You need to see this as a cold financial decision and not let your emotions about either house enter into your decisions.

[jrfrank]

I do claim my son as a dependent, so I think income wise I would be able to file chapter 7. I would definitely like to keep the PA house, becuase someday I would like to move back there, and rental houses in that area are rare, and I always have several people wanting to rent it, so keeping that mortgage would be a good idea. I have decided that I do have to unload the NC house, either by selling it or filing chapter 7. My current plan is to rent a house, move out and clean the place up and put it up for sale, but I will have to stop making payments on it so if I can't sell it within a couple of months more than likely I will have to go the bankruptcy route. I can't even file for divorce until November, and I've been told the whole process takes months to complete in this state. Unfortunately I can't hold on till November, I could probably finangle some way to stay in the current house till then, but I know I would completely ruin my credit in the process and then risk not being able to rent in a decent area, which is very important considering I have a child.

What will be the consequences of filing for chapter 7 while being legally seperated? The only thing I am worried about is she had her lawyer put in the separation agreement that she is not liable for any of the mortgage payments, and that I would refinance and take her off the loan by November, which obviously isn't possible, so would that in itself cause me even more problems? I am sure since she signed the mortgage contract stating that she is liable for paying that the separation agreement would not hold up in court.