Experiences with Ch 13 BK

[needhelpnj]

Hi! Thank you for having this forum! I am considering filing for bankruptcy and am wondering what your experiences have been and if you have any tips/lessons learned from your own situation.

My situation: I live in NJ and have two mortgages with Countrywide. The first is a 30-Year 5/1 Option ARM for $380,000 at 5.65%. The ARM will adjust March 2010 and with my current salary, I will not be able to make the new payments. My second mortgage is a 15-Year fixed of $110,000 at 6.75%. My only other debt is a car, of which I owe $16,000.

I work for a pharmaceutical company and we are going through our second merger in three years. During the first merger, I put my house on the market three times. I had one offer of $400,000. I applied to CW for a short sale and it was denied by CW due to "insufficient offer." The last house on my street (comprible to mine) just sold for $299,000. I also do not qualify for the Obama refinancing plan since my mortgage investor is neither Fannie nor Freddie. I do not qualify for a CW mortgage modification because I am not five months behind in payments.

This time in the merger, my company is being acquired and I have been told I could loose my job in September. I have nothing in savings since my current mortgage is 68% of my take home pay. I've also had medical expenses of $5000 in the past year. I'm living pay check to pay check every month. The house and car are my only debt.

I have spoken with two other real estate attorneys, and they do not think that CW will approve a short sale/deed-in-lieu because of the salary I make or even if unemployed, they will feel like I could get another job making that money or try to get money out of me through foreclosure. I have spoken with a bankruptcy attorney (who is also a real estate attorney) and if I were to loose my job and file right away (while collecting unemployment), I would be eligible for Chapter 13.

My goal is to get rid of the house and move out of the state of NJ. There are jobs for what I do in many other states but not in NJ. I don't think I will be able to financially survive with all of the increases. For example, my property taxes are going up $85 a month starting July.

Has anyone gotten rid of their home through Chapter 13 bankruptcy? Or if you have had a similar experience and can share some useful tips/lessons learned, I would really appreciate it. I'm trying to do as much homework as possible to prepare myself for this. Before I bought my house, my credit score was an 837. I would give this up to be Countrywide-free. Thank you for reading! This site is such a blessing.

[cahomeowner]

I am going through a similar choice. in your case if your not planning on keeping the house why not do a chapter 7 instead? the benefit would be an immediate discharge including any unsecured credit like credit cards, etc.

a chapter 13 is like a repayment plan for 5 years. I am leaning towards a chapter 13 so I can keep my home. in your case you may want to talk to an attorney about the pros and cons.

[needhelpnj]

For CH 7, I was told by one attorney that I made over the median income and I would have to be unemployeed for six months and make less than 30,000 to be eligible. Then a second attorney told me that if I lost my job, he would suggest that I was eligible right away. I'm waiting a few months to see if I keep my job or not.

The part that scares me the most is that I don't know if I will be able to get a job with it on my credit report. Do you know anything about this?

[cahomeowner]

yes I'm also concerned how a BK could affect potential future employment. the employers are not suppose to discriminate but this is really hard to prove.

I would think with the recent mortgage meltdown that we have conditions that have occurred that have pushed a lot of people into BK. hopefully employers are more tolerate with this but who knows for sure....

[needhelpnj]

Very true. A lot of people have told me that since so many have filed for bankruptcy or been foreclosed, that it shouldn't matter as much in this economy. However, I've been doing some internet searches and it seems that it can eliminate opportunities. Very scary. Have you decided what you are going to do? Or what are the options you are looking at?

[cahomeowner]

well the way I understand it (after talking to the BK attorneys) is that if you want to keep the house then you should file chapter 13. if you want a quick discharge of debts then file chapter 7 but the chances of keeping the home will be slim.

the benefit of a 13 is that you have an opportunity to lien strip the 2nd or 3rd mortgage. the lien is secured by the current value of the home which means there is a chance to strip or discharge the 2nd or 3rd mortgage in my situation.

I am hoping the market will rebound in 5 years (when I'm done with the plan) and then can sell the home and recoup some equity.

I too am concerned about the effects of a BK on potential job opportunities. it's difficult now having to compete with so many people now I am going to have a BK on my background check.

the flip side is that I will be locked into a chapter 13 payment plan for 5 years which means I have to run any changes in income or anything I want to buy in front of the trustee.

I was going to short sale investment properties but then I face a potential tax consequence (1099) or a potential deficiency judgment. I think a chapter 13 would work in my advantage and it may help get the bank to propose a suitable loan mod that I can live with.