To Move or Not To Move?

[Isobel]

Hi - I'm new here and have a couple of questions. Here are the facts:

* first mortgage $267K - Wells Fargo - stopped paying Feb. 2011
* second mortgage $35K - PNC Bank - stopped paying Feb. 2011
* >$100K underwater (i.e. value is ~$160-180K)
* plan on letting house get foreclosed on
* no Notice of Default yet and I'm still living in my house
* credit card debts $30K - stopped paying Apr 2011
* income as a single person is $78K/year but attorney said I pass the Ch. 7 means test
* plan to file Ch 7 ~ July 1st

My attorney said we can "pretend" I'm going to keep the house to make Ch 7 work but that probably wouldn't work if I'm stuck with a Ch 13, and my monthly payments will be about $900!!! I don't understand how this pretending scenario works, especially regarding my second mortgage - I chose BK because I didn't want to do a foreclosure and get stuck with the second coming after me years later... Any thoughts?

Also, I've been looking at rentals since Feb. - not vigourous searching but regular as in daily searching. I've found just 2 places that would work (I'm a musician and I have pets so it's not easy!). The first place I found I turned down because I thought I was crazy to rent when I can live in my house for free for a while. Now, last weekend, I found another apartment and I may be offered it this week, although it won't be ready until July 1st. I plan to file July 1st (praying they don't force me into a Ch 13...) and if I took the apartment would move in slowly over a couple of months. Many landlords I've spoken to aren't that concerned about BK if you have a decent, stable job, which I do. In fact pets seem to almost be more of a problem. Anyway, should I take this place? Any idea how long I could stay in my house for free? Is it worth the uncertainty and stress?

Thanks for your feedback... it's all very scary. I have no one to help me if the &*^( hits the fan....

[debee]

Your lawyer is proposing you stay in the house so you can list the expense on the Means Test and in your schedules.

When you file bankruptcy you indicate what you intend to do with your secured property (anything with a lien on it) and your options are to redeem (pay off), surrender, or reaffirm. When it comes to real property, you can do something called a "stay and pay". This is where you stay in the house so long as you continue to pay. If you stop paying, they eventually foreclose and you move out. There are people on the forum who've gone a year without paying and are still in the house, just saving up the mortgage payment for their futures.

So long as you don't redeem/reaffirm, your debt on the house gets wiped out in the bk so you can not be pursued for the deficiency.

Your income is awfully high for a single person in CA. Unless you have high monthly medical, I don't know how you're passing the means test. The median income for a single person in CA is about 48K.

If I were you, I would double check the Means Test. You can do that here.

[BKAttyMI]

I also have no idea how you're passing the means test with that kind of income coming in, visit another attorney or do the means test yourself. I think it's premature to move out of your house right now until you know what chapter of bankruptcy you'll be in.

[Isobel]

I also have no idea how you're passing the means test with that kind of income coming in, visit another attorney or do the means test yourself. I think it's premature to move out of your house right now until you know what chapter of bankruptcy you'll be in.

Thanks for your opinion re: moving. I think you're right, as much as I hate being in my house all alone and really want to begin "starting over" in a new place immediately, if not sooner...

As far as the means test, I recently took 2 weeks off without pay to visit my elderly parents back east - that's the only way I could pass the means test. During the visit, I discovered my mom has dementia, probably Alzheimer's, and I'm going to have to visit several times a year now to help them out - at great expense: ~$800/trip plus loss of income or at least income reduction if I use our family leave policy here at work. Although I'm not sure I entirely trust the attorney I met with, she seems to be a bit of bulldog about getting things done and she says with the reduction in income from the trip, I pass the Ch 7 means test. I am very concerned that my income will prompt the bk court to say I must do Ch 13, but I'm hoping the "totality of circumstances" will include the recent discovery about my mom's condition and the necessary visits back east... opinions?

[IamOld]

Hello - actually it's good to have a bulldog!

Since you said your atty is a bulldog she probably thought of this before...since you need to help your mom, and visit, etc., can you claim "support of elderly family member not living with you????" If you spend money on her/for her???

All the best of good luck with this and best wishes!!!!!

Thanks for your opinion re: moving. I think you're right, as much as I hate being in my house all alone and really want to begin "starting over" in a new place immediately, if not sooner...

As far as the means test, I recently took 2 weeks off without pay to visit my elderly parents back east - that's the only way I could pass the means test. During the visit, I discovered my mom has dementia, probably Alzheimer's, and I'm going to have to visit several times a year now to help them out - at great expense: ~$800/trip plus loss of income or at least income reduction if I use our family leave policy here at work. Although I'm not sure I entirely trust the attorney I met with, she seems to be a bit of bulldog about getting things done and she says with the reduction in income from the trip, I pass the Ch 7 means test. I am very concerned that my income will prompt the bk court to say I must do Ch 13, but I'm hoping the "totality of circumstances" will include the recent discovery about my mom's condition and the necessary visits back east... opinions?

[Isobel]

This just in: landlord from the apartment I found just called and said it's between me and one other person. Sounds like he wants to rent it to me and he said it's never happened before but he got 6 applications....feeling very uneasy about everything now... I need to make a major decision about whether to take this place (which won't be available until July 1st, right after I file) and sign a one-year lease...I'm gonna have a heart attack ...

"They" say have a place to live before you file... I say "Yes, I do but who knows for how long and how easy it's going to be to get another place that works?" (you may recall the musician and pet issues). But then "they" say that one can live in their house for up to a year before it gets foreclosed on.... I'm really, really, really torn... I thought the BK was akin to jumping off a cliff and now here's yet another cliff...

[IamOld]

Isobel, for whatever it's worth, I've had more heart attacks than you :-)

Maybe we can look at it this way...if you like the apt, and it's a nice place and it gives you piece of mind, then go. BUT foreclosures in CA may move slower than in my state (that's an understatement) - have you asked your atty? Ultimately, you have to have two goals in mind - a successful filing - and do what you have to do to get that and b) peace of mind...

This just in: landlord from the apartment I found just called and said it's between me and one other person. Sounds like he wants to rent it to me and he said it's never happened before but he got 6 applications....feeling very uneasy about everything now... I need to make a major decision about whether to take this place (which won't be available until July 1st, right after I file) and sign a one-year lease...I'm gonna have a heart attack ...

"They" say have a place to live before you file... I say "Yes, I do but who knows for how long and how easy it's going to be to get another place that works?" (you may recall the musician and pet issues). But then "they" say that one can live in their house for up to a year before it gets foreclosed on.... I'm really, really, really torn... I thought the BK was akin to jumping off a cliff and now here's yet another cliff...

[LadyInTheRed]

Isobel, if your attorney says you need to stay in the house to make a Chap 7 work, you should probably take her advice or be ready for a Chap 13. Don't do anything without checking with her first so you are clear about the possible consequences of your decision.

[Isobel]

LadyIntheRed (love the name) - thank you. I just emailed her and won't act until I hear back... IAmOld: I doubt you've had more heart attacks than me, since I just went thru a nasty IRS audit!!!

[IamOld]

LadyIntheRed (love the name) - thank you. I just emailed her and won't act until I hear back... IAmOld: I doubt you've had more heart attacks than me, since I just went thru a nasty IRS audit!!!

isobel, dear God, no!!!!!!!!!!!! Then definitely no. And as always, sound advice from Ladyinthe Red!

[BKAttyMI]

My opinion is that something sounds fishy about this means test. Granted, I don't practice in CA, but I have NO idea how you're even close to passing the means test with that income. Taking time off from work is not appropriate to pass the means test. If your mother is not a dependent, you can't include travel expenses to visit your parents. Not to be Debbie Downer, but I still don't see how you're even close to passing a Chapter 7 means test, I suggest seeking another opinion from a different attorney, preferably one that does *just* bankruptcy in your state.

As far as the house, I see no reason to move out of a rent-free home until you have to, but seek the advice of the attorney you hire for a game-plan in this. Just moving out of the house without working with an attorney is not a good plan.

[Isobel]

Hi BKAttyMI, aka "Debbie" -

I met with 2 different attorneys. They both only do BK in California and have been in business for years. The first said I was borderline w/ Ch 7 if I keep my house - this was several months ago before I took time off and got a raise. The second is the one I'm thinking of hiring - she was referred to me from an attorney in my county who many colleagues respect and admire. She did the means test with my pay stubs from the past 6 months and said I pass the means test, again if I keep my house. I did the means test myself back in January and I could see that it was a close call. By the way, my house costs about $2200 per month, not including any utilities or maintenance, and that's probably a big factor.

Re: time off not being "appropriate" to pass the means test - I probably didn't word it accurately. What I meant to say is before the unpaid time off, I barely didn't pass the means test, but after the time off I passed. I hadn't seen my parents for a year, they're approaching their 90's, have had some troubles and my work schedule was such that it was a window of time when I had to go, but had to do it unpaid because I don't have enough vacation time. I anticipate future trips back there because I need to help them move into a new living situation and my other siblings are useless, plus my mom's mental status will continue to take a downturn... They have no knowledge of my financial situation, and I certainly don't want them to know, and I doubt that claiming either of them as a dependent is feasible or desirable given my finances. So maybe I'm stuck between a rock and a hard place...

Moving out is for peace of mind and to ensure I have a place to live indefinitely before filing - somewhat emotional, of course, but peace of mind counts for something. Perhaps I should seek the advice of a third attorney and figure it out from there.

Thanks for your input...

[Isobel]

This just in (oh, the drama ) - my attorney says if we file in June and I move later, it'll be fine.

[BKAttyMI]

I completely understand what you're saying about your parents, but you have to look at this without the emotional aspect. It comes down to taking time off to visit your parents is voluntary loss of income to you, not required, no matter what condition they're in. If they were living with you as dependents, it might be different. With your income, your case will be highly scrutinized, you would have to have some major legitimate allowed expenses on your schedules to pass for a 7 without disposable income. As I stated, expenses for visits to your parents wouldn't pass here, whether they would pass in CA, you'll have to ask someone that regularly practices in your area. Try to think without the emotional aspect and I think you'll get what I'm saying a little bit better. Technically, unless your parents are dependent on you, they are legal adults in their own rights, expenses you spend on them are completely optional to you, even if for moving purposes or medical bills.

Go with what your attorney recommends, but I would expect a lot of scrutiny in a case like this.

[IamOld]

Hello! May I ask perhaps the question this way - let us assume that Isoblel's parents NOW because of the illnesses are dependent on her for support - do they have to LIVE with her to be "dependent" on her? That is, she has to arrange their affairs, support them financially, coordinate their care, clean their house, etc. In other words, if you have an elderly parent, cannot you support them financially from a distance?

I completely understand what you're saying about your parents, but you have to look at this without the emotional aspect. It comes down to taking time off to visit your parents is voluntary loss of income to you, not required, no matter what condition they're in. If they were living with you as dependents, it might be different. With your income, your case will be highly scrutinized, you would have to have some major legitimate allowed expenses on your schedules to pass for a 7 without disposable income. As I stated, expenses for visits to your parents wouldn't pass here, whether they would pass in CA, you'll have to ask someone that regularly practices in your area. Try to think without the emotional aspect and I think you'll get what I'm saying a little bit better. Technically, unless your parents are dependent on you, they are legal adults in their own rights, expenses you spend on them are completely optional to you, even if for moving purposes or medical bills.

Go with what your attorney recommends, but I would expect a lot of scrutiny in a case like this.