Our situation...input?

[HAP]

Hello everyone. Here is our situation in a nutshell (bear with me through the long drawn out intro).

I recently lost my job appx. 3 months ago. I'm a legal secretary and hopefully will get a job soon, but haven't yet at this point. My husband is employed and makes anywhere from $32,000 to $41,000 depending on if its a good year for overtime or not. My salary at my last job was $40,000 - while obviously I would love to find a job making more than that, I may have to take a paycut putting me in the range of $36-39,000/year.

We have a house we have a mortgage on and owe roughly $162,000 and a home equity loan of $49,000 (it is a 125% loan, our house may be worth $180,000 at the moment). We have roughly $40,000 in credit card/unsecured loans debt right now (appx. $6,000 of that is in our savings that we are partially living on now until I hopefully get a job soon). We also have a secured loan of $17,000 for a travel trailer we bought over a year ago (we've tried to sell it, no luck yet) and $28,000 balance on our truck.

We aren't behind on any of our bills, but unless I get a job soon it will only be a matter of time. So as of now our credit is pretty good (husbands is low 700 or very high 600's and mine is mid to high 600's) and we are not behind on any of our payments including mortgage or vehicles.

I'm due my 401(K) balance from my ex employer by February (appx. $6,000 before any penalties or taxes taken if I cash it in).

Not sure what I should do. Of course I hope I can just get a really decent paying job soon and just suck it up and pay the balances (for what will probably be the rest of our lives).

Hopefully can salvage most of what's left on the $6,000 loan in savings and my 401(K) money and pay back one large loan or a couple of credit cards with that combined money. However I'm worried we may have to look into bankruptcy if we keep spiraling downward as we won't have much income left over every month even after I get a job after all our expenses are said and done.

We would want to keep our house and truck. Are we screwed? Do you have to be badly behind on all your payments before looking into bankruptcy?

Any help or advice would be great. I am thinking about making a consultation with John T. Orcutt where I'm located (billsbills.com) the website seems to good to be true so I'm assuming it probably is. Thanks again and sorry for all this rambling!

[BassBoy]

First, welcome to the forum. I believe that you will find a lot of answers here and much support. We have a really great bunch here.

You don't need to be so far behind that BK is the only way out. If you are in the negative due to job loss or reduced income, then BK may be able to help you out.

You will be able to keep the home and the truck. Secured assets can survive BK. You'll need to reaffirm or redeem these items, but you can keep them.

[HAP]

Thank you for your response

I guess I'm trying to get pass the stigma of what you hear about bankruptcy or that it will ruin our lives forever. I'd like to think that if we had to go this route it would actually improve our lives we could pay for things with cash or even have a real savings account one day (not the kind we have now where it's just borrowed funds sitting in our savings). I guess I feel like if we do file we will have failed. (Or in my case since I'm the one who has taken care of the bills our entire 10 year marriage - that I'm the one that failed to take care of my family's finances and got us into this position).

[krielly]

HAP,
Sometimes things just "happen"......and are not necessarily anyones fault. Give yourself a break, hon.
We were not behind on much of anything either when we did our 13. I think you may want to consult an attorney regarding your options.
I totally get where you are coming from! I remember I was absolutely DEVISTATED at the thought of filing when we did a couple years ago. I felt like a piece of dirt.......literally.

I'm over it........for the most part

The law exists EXACTLY for the purpose of helping folks like you get a fresh start.

There is so much wonderful support on this forum. Glad you found it. I wish I had known of it when we filed, but only recently discovered it.

We were able to keep our house, car, and 2 trucks. Also a camper, and all my hubbies business equipment.

Welcome, and keep posting!!!!!!!!!!! Let us know how you are doing.

K

[HAP]

Thank you All the kind support I see on this board is wonderful!

[BassBoy]

Oh the misconceptions about BK. You have no idea how many times I got into arguments with family and friends about what BK really is. Anyways, BK does not ruin your life forever. It's ONLY a minor set back. We fell, but we got right back up and kept going. If you look through the After BK section of the forum, you will see that so many of us have bounced back and did it right the second time around. IMO, many of us are doing better than we ever have.

[HAP]

Yeah that's one thing, I don't want to dissapoint my parents. I'm not giving them enough credit though, they see how hard we're trying and all they want is for me (us) to be happy and not going through all this crap, but this isn't anything they've ever had to do (my inlaws have though on the other hand). I guess they wouldn't necessarily have to know, though I can't see me keeping this from them if we did file.

Thanks again for your input!

[keepmine]

Part of the fresh start that bk promises means, making better decisions.
Two huge mistakes you are about to make are, trying to keep a house that has a lot of negative equity and, withdrawing money from the 401K. ERISA qualified retirement accounts are exempt from creitor seizure. Don't turn it into cash to pay bills that will be discharged in bk. Don't drag secired assets that you're upside down on in a big way through bk-like the house and trailer. Let 'em go.

[Minnymouth]

As we state filing bankruptcy is a "business decision"...... to better your future.

If a home that just too expensive right now is holding you financially down - it's time to let it go... You can buy another in about 2 years at good rates.

You worry too much about what other people think.... Its not their problem, they don't walk in your shoes, and they sure don't pay your bills.

You do what you HAVE to do to solve the problem.....

If you do it NOW while you still have a decent credit report and score, your credit score will not suffer much.... Mine didn't.....

Folks financial status can change in the blink of an eye for one reason or another. Sometimes they have to make decisions to correct the problem quickly.

When its all over and done with, you will be amazed at how releived your are and will probably wish you had done it sooner, rather then struggling each month and worrying yourself to death over a BILL....

Keep us posted as to what you do......

[HAP]

I could care less about the trailer, but we do need a place to live. I guess I just need to bite the bullet and speak with an attorney since I'm not sure how home equity loans are handled when the equity isn't there. If you are allowed to discharge home equity loans where there really isn't much equity our leftover cash every month would be about $1,800+ (this would be with keeping our current home and paying on it - assuming I get a job making what I was making before). If we still had to pay the H.E. loan payment every month along with paying the mortgage than we would have appx. $1400+ left over every month. I guess I don't understand BK and need to speak to an attorney because I don't see how keeping our house would be a bad thing. Also what if we let our house go but then couldn't find a place to live - not a good scenario with a 6 year old...

[HAP]

Thanks MM, just saw your post after I posted.

[ameliabedilia]

"I guess I don't understand BK and need to speak to an attorney because I don't see how keeping our house would be a bad thing. Also what if we let our house go but then couldn't find a place to live - not a good scenario with a 6 year old... "

Keeping your house if you owed what it was worth or less- even had a touch of equity in it wouldn't be a bad thing, but if you owe more than it's worth, it would.

As far as the house- what a lot of people do is find a new house to rent before filing, then they give up the house with all the negative equity. Right now you are upside down on your house, you have a hole to dig out of before even breaking even. Only in bankruptcy could you get out of that free and clear and then have a chance to get something again in a few years. If it were me, I would give the house up and rent, especially with the market where it is, there are alot of people on this board who bought houses a year ago that are not worth what they paid. If you keep those things post bk, it's not a fresh start at all.

[rrockinggramma]

I do not know what district you live in but there is a motion that exists, called the Pond Motion that allows you to strip the lein on your home to FMV. It is allowed in certain districts and has court cases to back it up. Check with your attorney about that as well. You may have options and still be able to keep your home.

[SinkingFast]

Don't cash out or spend the 401K money. ERISA qualified Retirement plans are Exempt in BK. So you won't incur any penalties and you'll still have that savings remaining after you've filed BK.

You can't Discharge the HE Loan and keep the house. It won't work that way. Even tho there's really no equity backing the loan, the Lender still has a Lien on the Deed/Title of your home. If you don't continue making payments, the Junior mortgage, your HE Loan, can Foreclose on your house to try to get their money.

I know it's hard, but maybe think about letting the house go. Definitely the trailer. Maybe even the vehicle. Move some place to rent and live cheaper. File while you're still unemployed. Get a complete fresh start.

Then when you do get a new job, you'll have no real fixed costs to live. You can save up a good down payment for another home. You'll still have your retirement money in savings. And you'll have learned from your past mistakes financially.

[HAP]

Thanks again everyone.