First, I've followed this site for a bit, read a lot and talked to two bankruptcy attorneys yesterday to get their advice. As a background, here's my situation: I have about $45K in credit card debt, one lease vehicle of payments of $345/month with 2 years left (and will probably go over mileage limit), and another vehicle I bought with payments of $377/month (with a $5K negative equity). I own a house with a payment of $1731/month (with negative equity). Both attorneys gave this same advice - and they did not know I talked with another attorney: File chapter 7, walk away from the cars and house and stick it to the credit card companies. Now, because I'm current on the cars and house, I have time on my side. And with the automatic stay, the banks cannot immediately take these assets. As for the cars, the banks have to petition the court to lift the stay AFTER the creditors meeting. One attorney said she can postpone this meeting for 8 - 10 weeks. Then, the banks have to petition the court to lift the stay, which will take at least another month. Then, they have to call my attorney to get the approval to reposses the vehicles. Four months have now passed. In the meantime, I saving the money that I would normally go to the car payments. So, in my case, this is ($345 + $377)*4 = $2,756 that I save. As for the house, I can live in the house without making payments for 12 - 18 months before I get kicked out. So, if it takes 12 months for the bank to finally force me out of the house, the money I save is $1731*12 = $20772. All I have to do is make sure that the house is insured. But, since that was paid in July for the upcoming year, I'm covered. The property taxex are paid before the bank gets any money from the sherrif's sale since taxes are priority debt. Now, follow me here. Once the cars are repossessed, I will have $9,812 saved which is (345+377+1731)*4. I can buy a car for cash which will get me back and forth to work. Then, when I get kicked out of the house, I will have enough money saved to prepay rent for a year assuming that I rent a house for $1000/month. Once, two years have passed after the discharge, I can apply for another mortgage - and will have more than enough of money saved for a 20% or 30% down payment. As for any defiencies that may accrue from the repossessions of the cars and foreclosure of the house, it will not be reported to the credit bureau since they were included in the bankruptcy. Also, the banks cannot come after me for these defiencies. So, what do you smart people think? Is this the way to go?
I know a lot about your situation. I am overwhelmed at how you posed so many questions and I ask that you ask one at a time. Do me and yourself a favor, and ask me a question and I will answer it for you. Your "novel" is a bit too much....I don't know where to begin! SnakeMan
I was just attempting to give some background as to my situation. I, too myself, was overwhelmed and surprised by the advice I received. So, to start off, I was told I have many options available to me. However, the best option according to the attorneys, is to walk away from everything and start over, since I already have a good paying job. I have not done anything yet, but will soon. I'm just looking for some other "words of wisdom". Like, what would you do?
Your attorneys sound as if they give the best advice. You have a ton of unsecured debt and are upside-down on both the house and cars. IF what they say is correct about the time frames with the 'Stay' on being evicted and repossesed, I'd go with their option. Also, being that you will have to move eventually you MAY be able to get the BK's to fall off your report as you will have a new address once you dispute this information. Also, I probably wouldn't get back into a house so soon after filing unless you have a need, i.e. big family. But that last part is just opinion based on possible large payments and wiping out your savings more than anything else. I would try to hold on to that nestegg for a little while, just in case you find yourself getting in over your head again.
Assets, assets, assets. First of all if you do go with their advice, clear out your bank accounts. BK judges and trustees alike, do not appreciate people filing BK who may have money to otherwise pay their bills. As far as the whole BK thing goes; It is one of a couple of options that I think you still have. You say your buried in debt up to your eyeballs. What kind of money comes into your house every month? Is it conceivable that you could catch up? Even if it took some time? BK is the last option you should consider. With a chapter 13 on the other hand, you could keep your stuff as well as around 15k in liquid assets. This "wage earner plan" will only pay around 10 to 20 cents on the dollar to your credit cards and other unsecured debt. Also, in a chapter 13, interest rates and even the amount owed can be negotiated. This means that most of your payments being made to the trustee every month would go far to catch up the home and auto loans. All unsecured debtors are the very last people to get anything. Also remember this, just cause you file BK, doesn't mean that they can't report all the stuff to your Credit Report. They can and will. Finally, the redemption period which is the time frame given from foreclosure/sherriff sale to the point that they kick you out, is 6 months. The only exception to this is 12 months if you have 10 acres or more. I am trying to say that you must be careful when the attorneys tell you "this can be delayed" and "that can be delayed so many months", because creditors and their attorneys frequently can get a lift of stay to take collateral by merely showing that the term of the BK or the many "delays" are unfair to them, and threaten the secured value in the property. These attorneys have little say other than to follow the letter of the law when it comes to creditors and a BK judge. They will charge you considerably more than what they are now quoting you if they have to appear to defend or answer motions. You asked if it were me what would I do? I would not file BK. I would send a hardship letter to the mortgage company. I would let them know that I am considering BK unless they will set up a repayment plan that meets both of our needs. I would do this with the auto loans as well. I would then shread the cards and make arrangements with them to repay. Worst they can do is get a judgment. If I were truly in a negative equity position, I would welcome anyone to come by and try to repo a car that has a first secured lien holder. Attaching a lien to a house is impossible if it was not a home improvement or property construction loan that you owed money on. I would clear out all bank accounts. I would exercise my right to not allow any repo guys or court officers into my home. I would then do the best I could on playing catch up and in few months or a year or so when I can start to see that my hard work and dedication payed off, I would be grateful that I didn't take the easy way out. Your credit will be destroyed, but you will show a good faith effort which DOES mean something to a lot of folks. In a day and age where everyone is filing BK, we are almost immune to the fact of how devastating both financially and emotionally this is. If I had to do it over again, I would never have filed BK. Think about it very hard. Maybe you could even persuade some creditors to do things that they normally wouldn't do if you hinted at that fact that unless they work with you to get things ok again, they will be forced to eat 10 cents on the dollar...if they even see that much. For chpt 13 filers, less than 15% ever finish the repayment term which is usually 48 months. Most all will convert into a chpt 7 within 12 months. Judges who see a guy with a good income may not allow you to file chpt 7. Especially if your income could potentially pay these debts in a reasonable amount of time through a chpt 13 Ahhh goodtimes.... SnakeMan
How are you going to save all this money? When we filed our Ch. 7 bk we had to show where every penny of our income was going and that we had ZERO income leftover each moth AFTER we were relieved of our debts. It is very nice to no longer have debts but we certainly aren't saving $1000's each month because we filed, we didn't have the money to pay the bills to begin with. We now are happy to break even each month and know there are not huge debts hanging over us. Yes, your theory of filing and saving money is a good theory, BUT if you have that much money left over each month chances are you will not qualify to file Ch. 7 but rather Ch. 13 which someone already described. As for your leased car that you pay $345/mo for, you can keep it by making good faith payments. Well, if your budget alllows for it. We included a leased car in our Ch. 7 and kept in without reaffirming it. The bank has allowed us to keep it as long as we make the monthly payments on time, we can turn it back over to the bank at any time with no penalty. You are correct in thinking that you should let your other car and house go that have negative equity. But be very aware that it won't take the banks too long to come after these items. Although your atty says it can take up to 12 mo., I am willing to bet they forclose much quicker than that. Weigh out your choices very carefully. Bankruptcy is not something one should consider unless there is no way out from the debts you have.
The theory for getting all this savings is that we stop paying the house and car payments AND save this money until they are taken away. Then, use this nestegg to buy a used car and rent an apt/house.
There is theory and then, there is reality. No way in hell your secured creditors will cooperate with the bk lawyers time frame. Ask the lawyers how much they will charge in legal fees if the creditors file for relief of stay.
I think the risks are as follows. One you could be forced into a chapter 13 if your disposable income permits that degree of savings. Second, the foreclosure will take time and that could delay your ability to buy a house by an additional year or so even though it was included in bankruptcy. Also, you have to watch your credit reports because the deficiencies will likely show up and need to be disputed.
Did the lawyer mention that you could get thrown into a Chapter 13? No cars and no house = 2400 in expendable income in which to pay your debtors. Even if you assume $1000 mth rent $1400 is ALOT (IMHO) leftover a month to qualify for Chap 7.
I want to thank all of you for your advice. The best option I have is to file ch 7 and keep the house and cars. That way, my budget will show little expendable income. And, I should pass through the ch 7. Then, start to rebuild my credit. Yikes...the mistakes we make.
I have not done anything yet, but will soon Mr Jeep It ============================ Best of luck in what ever you decide. 0_0_0_0 /l ,[____], l---L --OlllllllO- ()_) ()_)----)_)
There is always a master plan!! If I had to choose I would not file BK unless it was a VERY last resort. I've been there! I have learned this much: Until Nov 2011, my scores will be about a hunded points lower than they really could be but 1 thing remains...I will always be a person who filed for bankruptcy. That, unfortunately is a legal question on a lot of applications: "Have you ever filed for bankruptcy?" Yes, even after it falls off your credit report, you still have to answer it honestly. Granted, you may be a far less risk than someone with debt out the wazoo, however you will be raped on interest charges for a few years after the filing. It has it's pros and cons trust me. I would not do it again, ever. Exhaust all of you resources. Try to work out payment plans and send hardship letters. It just may work.
