New Hear? Should I File? Facing Foreclosures.

[dw2008]

We are facing foreclosure of two homes (we bought a new house while selling another one, which never sold we are now 6 months behind on both houses, foreclosure have been filed for both).
We would like to save them both, by renting out the most expensive one and move back into the cheaper one and get back on track with the payments.

My husband has heard that filing for bankruptcy will provide for automatic stay on all debt actions (freeze the foreclosure), and if we withdraw the bankruptcy papers within 30 days, it will be as if we never filed...but will give us enough time to pull the funds to get both houses out of foreclosure and to get the house rented?

Any flaw in this plan??? I don't know much about this, but we would like to hold out from filing a "true" bankruptcy because of all the negatives that come with it. At the same time we want to avoid foreclosure. Any advice?

If we should file, with two houses should we get an attorney because of the complications. Would we be able to keep the houses, one/both? We have more equity on the old one, I am not sure if we have any equity on the new one. I guess I need a sense of reality at this point...

Sorry for being so lenghthy

[keepmine]

A dismissed bk stays on your credit report for 10 years just like a discharged bk. {Chapyer 7}
Also, if the equity in your primary dwelling is above the level your state exempts or, if you have other assets that are not exempt the trustee does not have to let you just withdraw. Once you file, you no longer have contro;. The trustee starts driving the bus.
As to the source of funds-please don't say you intend to loot your 401K or IRA or other ERISA qualified retirement accounts. Those are exempt assets in a bk proceeding.
A Chapter 13 could be a different story but, it depends on how workable a plan you have. Realistically, could you rent the home and keep it rented at an amount that will cover the mortgage plus, can you catch up 100% of the arreage over 60 months.

[dw2008]

Equity?

I don't get the deal with equity? Are you saying that the more equity you have the more you lose...the trustee will take the equity from car and house to pay debt?

I do get it on the filing and impact on credit, thanks for clearing that up. No I will not touch my 401K, that is sacred.

I really don't know that I can rent the expensive house for enough money to stay on track. I know that I can back on track with my old house, and that's the one with the equity, will I be forced to give the equity from that house to pay my debts?

Also, I have not filed for taxes for the past two years, but when I do I would expect a refund, is it best to wait to file the taxes when everything is done (after discharge)?

So many questions, but thanks for any input.

[lrprn]

We are facing foreclosure of two homes (we bought a new house while selling another one, which never sold we are now 6 months behind on both houses, foreclosure have been filed for both).
We would like to save them both, by renting out the most expensive one and move back into the cheaper one and get back on track with the payments.

This plan may have been workable if you did it before you got 6 months in arrears on both. Now you two have a very hard uphill climb ahead unless you can very quickly get both houses caught up and stay on time with both mortgages.

Any reason why you are trying to keep both houses? Have you considered letting one go and working with your lender to catch up the other quickly?

My husband has heard that filing for bankruptcy will provide for automatic stay on all debt actions (freeze the foreclosure), and if we withdraw the bankruptcy papers within 30 days, it will be as if we never filed...

Sorry - completely untrue. Once you file, it's on your credit record no matter what happens afterwards.

Any flaw in this plan??? I don't know much about this, but we would like to hold out from filing a "true" bankruptcy because of all the negatives that come with it. At the same time we want to avoid foreclosure. Any advice?

The flaw is wanting to keep things as they are when you can't afford to keep things as they are. You have some tough choices ahead which will have to be made no matter how long you put them off or try to reason yourselves out of them.

A bankruptcy is a bankruptcy. There is no "true" vs "pretend" bankruptcy. Filing should be done when doing so is the right thing to do for the best long-term financial outcome for your family. It's a business decision, and often when you find yourselves in the situation you're in, it can be the best one to make overall.

If we should file, with two houses should we get an attorney because of the complications. Would we be able to keep the houses, one/both?

Yes, if you are determined to keep both houses, having an attorney is best.

We have more equity on the old one, I am not sure if we have any equity on the new one. I guess I need a sense of reality at this point...

If you tell us which state you're in and how much equity you have in the old house and the new house, we can help you sort this question out much more easily.

You are just starting on a journey of discovery. It's a tough place to be when you finally figure out that you can't keep doing what you've been doing and have to make some hard choices.

The best thing you can do right now before making any decisions to do anything is make free or low-cost initial consultation appointments with 3-4 experienced bankruptcy lawyers in your area. There's no obligation. Go in with your list of questions and take notes with each lawyer. You'll learn a great deal and will have a much clearer picture of the best options for you to take in your situation.

Good luck and be sure to come back and let us know what you find out.

[lrprn]

I don't get the deal with equity? Are you saying that the more equity you have the more you lose...the trustee will take the equity from car and house to pay debt?

When you file bankruptcy, you are required to complete the Means Test for the bankruptcy chapter you qualify to file and fill in the Schedules as well. What you are allowed to keep and what is at risk to lose is mostly determined by your state's bankruptcy exemptions.

All states have pre-determined homestead and auto exemptions. The amount of equity (what you owe on the asset vs. how much it's worth in the current market) determines if the asset is safe to keep or not.

If you tell us which state you're in, we can direct you to your state's exemptions. You can also search for them online using 'bankruptcy exemptions (your state)'. However, some of the sites are not kept up to date so you need to be careful about that.

No I will not touch my 401K, that is sacred.

Good! This is one of the worst financial mistakes that badly-informed debtors make.

I know that I can back on track with my old house, and that's the one with the equity, will I be forced to give the equity from that house to pay my debts?

No, that isn't how bankruptcy works.

Here's two good online resources that explain how Ch 7 and Ch 13 work -
Chapter 7 - http://www.uscourts.gov/bankruptcyco.../chapter7.html
Chapter 13 - http://www.uscourts.gov/bankruptcyco...chapter13.html

Go through both, then come back with questions (there will be many! )

Also, I have not filed for taxes for the past two years, but when I do I would expect a refund, is it best to wait to file the taxes when everything is done (after discharge)?

You MUST file these years before you can file for bankruptcy. If you are going to get refunds (and you won't get as much now because of late filing penalties that have been piling up), you need to be sure you can protect the cash with your state exemptions or spend down the cash on reasonable living expenses before filing. A lawyer can help you sort this out.

Keep asking questions - we'll help you sort things out as best we can. But you can help yourself a great deal by learning more about bankruptcy. Read the stickies here in the forums - there's tons of great information and most of your questions will be answered there.

[dw2008]

Oh my gosh, thank you so much for your quick and thorough reply I really appreciate it...I need it now

Really as far as I'm concerned I just want to save my old house, but my husband really want the new one, but I know that we can't afford the payment on the new one even if the old one was out of the way. I want to keep the old house, because it is more affordable. He wants the new one, because that is his dream house, and he thinks that it will be a great investment because of the growing location it's in.

Thanks for clarifying the bankrupcy filing and impact on credit, I do get it now.

I do know that I cannot afford to keep things as they are...but it is a hard decision to file for bankruptcy but I don't think I have much of a choice at this point (one of the house foreclosure sale date is June 3rd, the other is July 3rd). At least bankruptcy will give me time to figure out what I need to do, what house to save. In addition, to the negative that goes alogn with bankrupcty, I particulary would like to avoid filing, because I hold a financial position and I hope that this does not impact my ability to continue to work in that area (take a new job for example if they do a credit check). Also, I wanted to start a small business, and I wonder how plausible that would be with a banruptcy if I need loans to start the business. But of course, I do know that carrying this high mortgage and staying in my current situation will not allow me to do nothing anyway.

I am in Georgia, I am not sure on the exact values of the homes with the current market. But I owe $151K in the old one, and I would say that the home value is $190. The new one I owe $360 and I would estimate the value at $350.

The thing is my husband is a real estate agent, he just closed on a house that will allow us to reinstate the old house, by paying what we are behind, interests and attorneys fees $10K. However, I don't know how feasible that would for the new house, they are asking for $20K to reinstate, he thinks he can pull it off, but I don't think he has enough time to get that much by June 3rd. He is hoping to get another job, which will hopefully change our financial situation enough to allow him to pay for the difference between the rent and the mortgage (so far we've not been able to rent the house and have had to reduce the asking rent price, right now the difference is ~$800. I still think that this plan would cause us a lot of financial hardship, but I am willing to try it to see if we get in a better situation in year (I am also expecting a promotion at work). So with all that at play I don't know if bankruptcy is the choice for us...however with the foreclosure dates scheduled, we are running out of time and I don't know if we have any other options to stop the foreclosure.

Ok...I think that helps provide a fuller picture...Please help.

[lrprn]

Really as far as I'm concerned I just want to save my old house, but my husband really want the new one, ....

You two need to make a decision because wavering between the two houses has put you in danger of losing both to foreclosure.

...I don't think I have much of a choice at this point (one of the house foreclosure sale date is June 3rd, the other is July 3rd).

With the auction dates already set for both houses - one just two weeks away and the other just six weeks away - you both need to sit down right now and get some firm financial figures on paper. That will allow you to sort out which house is truly affordable on the income you both make NOW, not what you might make in the future.

In addition, to the negative that goes alogn with bankrupcty, I particulary would like to avoid filing, because I hold a financial position and I hope that this does not impact my ability to continue to work in that area

It is against the law to discriminate against you solely because you filed. We've had several members that had financial positions in banks, etc who have successfully gotten new financial jobs after filing.

A foreclosure would be almost as damaging on a credit check as a bankruptcy, so don't hide behind that misconception.

Also, I wanted to start a small business, and I wonder how plausible that would be with a banruptcy if I need loans to start the business.

The recovery after both a foreclosure and a bankruptcy comes as time passes and you continue to pay everything on time. Most Ch 7 filers find an almost complete recovery two years after filing, Ch 13 filers at the end of their 3 or 5 year plan.

I am in Georgia, ... I owe $151K in the old one, and I would say that the home value is $190. The new one I owe $360 and I would estimate the value at $350.

Here's the link to the latest updated Georgia exemptions - http://www.thebankruptcysite.org/exe...s/georgia.html

If you qualify to file Ch 7, as a married couple you can protect $20,000 in home equity. Since your older home has an estimated equity of $35-40,000, that puts your older home at risk if you qualify to file Ch 7. With only $10K equity, your second house would be protected if you file Ch 7.

However, you haven't shared your combined gross income from all sources from the last six calendar months and we don't know your family size. Check the current state median income for family size at http://www.usdoj.gov/ust/eo/bapcpa/2...come_table.htm . If you are above these annual gross income figures for your family size, then you'll have to complete the required Means Test and Schedules to see if you show disposable income. If the forms show more than $160/month in disposable income, then you can't file Ch 7. You would have to file Ch 13 instead.

Filing Ch 13 is definitely not the same as filing Ch 7. However, Ch 13 could protect BOTH houses rather than limit you to one. Only an experienced GA lawyer can give you a reliable answer to whether Ch 13 may solve your financial shortfalls or not.

Don't make the mistake of basing important financial decisions on what might happen in the future. There's a chance that your husband's current income may fall in this shaky real estate market or that your expected promotion may not come through at the expected time. As my wise granny used to say, "A bird in the hand is better than the one in the bush." Make this decision on the income you know you have now not what you might have in the future.

It's time to make appointments for free or low-cost initial appointments with 3-4 local experienced bankruptcy lawyers as soon as possible. Explain everything like you have here and get real legal advice about what's going to be possible in your situation from lawyers who KNOW what's going to work and what isn't given your situation in your local court.

The important thing is not to allow yourselves to stay frozen in place because you can't decide which house to save. Allow the knowledgeable lawyers to help you know what's going to work for you and what isn't.

Filing bankruptcy is a cold, emotionless business decision that cross-compares what's possible to see the best financial outcomes for your family - nothing more. It's not a death sentence - bankruptcy allows you to climb out from under an impossible debt load to get a fresh financial start that you can support going forward.

Hang in there - keep us posted on what you decide to do, ok?

[dw2008]

I think I qualify for Chapter 7

Thank you so much for all your advice, I needed to hear them. My husband is still in denial about the grave status of our financial status right now and the urgency to take actions now. You are right on focusing on our situation now as opposed to what could happen in the future, that's what got us in this mess to start with.

I looked at the exemptions, like I said, I was just estimating the numbers for the value of the homes, I hope that the old house value is acutually lower than I estimated so it can be protected under Chapter 7. I hope that I can file Chapter 7 to get a a clean slate and a fresh start. I think I may qualify for it as well from the exemptions (depending on the actual value of the old house) and my income. Our family size is currently 4, but I am expecting a new little one in July. Our combined income last year was about $79K which I think is above the median for family of 4. However, this year's 6 months income would only be $30,500 (61,000/2 he does real estate, so I can't really estimate what the rest of the year will be like, so I have only included my salary plus what he has brought in at this point and divide that by two) compared to the median income in GA $34,505 ($68,611/2 family of 4). Based on that I would say that we could qualify for Chapter 7. My husband will have to make the hard decision in letting the new house go, because we just cannot afford it.

Where can I find the Means Test Calculator/worksheet?
Are my assumptions/calculations on the right track as far as Chapter 7?
Is Chapter 7 better than Chapter 13 if you qualify for both?

I have made several appointments with attorneys for next week, so hopefully by this time next week I will also have a clearer picture of where we are going.

Again, thanks for all your help on this.