considering chapter 13...

[lugson]

I posted this earlier in the wrong area - so here it is again in the right place.

We received a loan mod on our first in July of 08. Long story short - we can no longer afford both our first and second mortgages... the second was never modified and we are looking into that now (cw is the servicer - bony the investor). We are not very hopeful cw will be able to help us enough with a mod so we are checking into chap 13.

We have been told we are good candidates to have the 2nd stripped, and we are now getting a second opinion - just out of curiosity. I am finding it difficult to find out if after the trustee determines your payment plan do they leave you with enough $$ to build a savings for unexpected expenses? I am so worried we will end of with more medical bills or car repairs and for this we would need a very good cushion in savings... Anybody able to offer any insight? Thank you in advance!

[franklinco]

Originally Posted by lugson

I posted this earlier in the wrong area - so here it is again in the right place.

We received a loan mod on our first in July of 08. Long story short - we can no longer afford both our first and second mortgages... the second was never modified and we are looking into that now (cw is the servicer - bony the investor). We are not very hopeful cw will be able to help us enough with a mod so we are checking into chap 13.

We have been told we are good candidates to have the 2nd stripped, and we are now getting a second opinion - just out of curiosity. I am finding it difficult to find out if after the trustee determines your payment plan do they leave you with enough $$ to build a savings for unexpected expenses? I am so worried we will end of with more medical bills or car repairs and for this we would need a very good cushion in savings... Anybody able to offer any insight? Thank you in advance!

When you make your plan you have a provision for periodical expenses. You can provide for expected expenses that are not recurring monthly like periodical insurance, replacement of tires and the like. When you file chapter 13 you have a form you need to fill out which you put in standards for expenses originally intended for IRS collection purposes. You can find the forms if you google for "DOJ median income". To summarize, they go on the previous six months income which you must provide pay stubs for all income. Then you use the table which varies per state for your family size. If you are above median income you need to fill out form 22C and plug in the fake IRS expenses. If you are below median income you only need to fill out the form up to a certain part. The values you fill out determine how much you need to contribute to unsecured creditors. Since I was below median income for the 6 months prior to filing CH 13, I only filled out the form to where it said to stop. Basically I think that the living expenses for housing, car payments, non-mortgage housing expenses comes in around $3000 a month. The rest could be considered available to pay unsecured creditors. I do not know for sure since it depends on state, region, family size and other variables. The best way to determine for yourself is to go to the site and get the values for living standards and try to fill out form 22C to see how you would fare. Also if you are planning to file you need to complete some credit counseling before you can file. There should be a list of accepted credit counciling agencies. They realy complicated filing with the BAPCPA laws from 2005.

[gray517]

franklinco

would like to pick your brain for quick question about Bankruptcy, we have 3 adults at home including my 21 yr son, and 3 cars with payments, I bought his car as graduation gift in 2005, so the loan is in our names only, but it is his car, could this be an issue? I thought I read somewhere in all the bankruptcy codes that you are only allowed to keep 2 vehiicles. I have all the worksheets and various other things to get started and if it is viable option will need to start planning now to have the fee for the bankruptcy attorney in 6-9 months or so. We already got Mod on cw mortgage thru Naca, but were considering the Bankrupcty since we haven't paid CC since 6/08 when I lost my job and have a voluntary repo against hubby as had to let oldest car go back to lender. and do not have the funds to even try and settle, was a little hopeful about the cram-down thing and reducing principal but with the new restrictions on bill won't help us that way since we already got mod to permanently lower rate and payment is below the targeted 31%, would just like to clean everything else up and try to move forward, thank you for your input.

[lugson]

franklinco,

Thank you for your input. We are currently filling out the mentioned forms. It just scares us to think we could be left without the ability to create an emergency fund. We have also spoken to a second bk attorney who has given us some possible debt negotiation alternatives. We will see where we end up in the next couple of months. Thanks again for the info!

[franklinco]

Originally Posted by gray517

franklinco

would like to pick your brain for quick question about Bankruptcy, we have 3 adults at home including my 21 yr son, and 3 cars with payments, I bought his car as graduation gift in 2005, so the loan is in our names only, but it is his car, could this be an issue?

The way that I understand the workings of chapter 13 is that it is a repayment plan regarding using your future wages to pay off your existing debts. The important aspects is regarding the classification of debt. You have secured debt which you would have to surrender if you could not pay. I could not find anything regarding any limitation on the amount of cars allowed. The fact that it is secured is the determining factor. The effect of a secured claim is the pecking order debts are paid. For secured debt the priority is higher so the secured debt is regarded over unsecured debt. The effect is that the more secured debt you have, the less of a percentage the creditors will get. Also if the car loans are less than 2.5 years into payments, the full amount of purchase is required to be covered by the plan, being that you bought the car in 2005 it should be passed that requirement. For all vehicles your interest may be reduced, mine was cut down to a lower rate, however the car loan was less than 2.5 years so I have to pay the purchase amount.
One consideration to check is the amount owed versus the value of the collateral. If you owe more on the car, then you have no equity so the required amount the car is over the remaining balance, you would have to distribute to payment of unsecured creditors. I don't know if the car is titled in your son's name or not. If it is titled in his name but the debt is being paid by you, I am wondering if the collateral is safe while the loan is being paid. In that case the car is not yours but the debt is.
The only provision in chapter 13 that I could imagine is the allowed exclusions would only qualify two cars. I don't know for sure but it would make more sense.
Having three cars financed would just add to your secured debt load I would think. A BK lawyer could tell you for sure.

Originally Posted by gray517

I thought I read somewhere in all the bankruptcy codes that you are only allowed to keep 2 vehicles.

I didn't see the information so could not prove the unknown. If you find the information I wonder if it is titled on your name or debt owed by you. Don't run off to transfer title if it is titled in your name, they could claim attempt to hide assets or something. Be truthful to whoever is going to represent you and they can deal with what to do to prevent the appearance that you are doing something wrong.

Originally Posted by gray517

I have all the worksheets and various other things to get started and if it is viable option will need to start planning now to have the fee for the bankruptcy attorney in 6-9 months or so.

I paid 500 down and the rest through the plan. The cost was 2 to 3 grand but was paid through the plan. $125 a month. We also had to pay the filing fee for chapter 13 which was over $200 so the cost initially was around $750. Fees may have risen from back in early 2007 when I filed so shop around.

Originally Posted by gray517

We already got Mod on cw mortgage thru Naca, but were considering the Bankrupcty since we haven't paid CC since 6/08 when I lost my job and have a voluntary repo against hubby as had to let oldest car go back to lender.

I understand completely. I tried to hold off as long as I could before we filed. I should have realized backsliding well over $1000 a month was $2000 the second and so on. We really tried but getting a job for her was really tough and even lasted well into the filing. The plan compensated for it to allow her another 6 months before payments increased. She got a job about 6 months in so we got lucky, otherwise we would have had to convert to chapter 7.
We waited so long we were 5 months back on the house, let credit cards slide and one of the cars was repossessed. We managed to keep one car up and the utilities paid up. Don't wait too long before you file or you may lose a lot and have no money to file.
If I am reading your employment picture right, you have not found work since June 2008. Keep on trying and realize that it is important to take action as soon as possible. If your modified loan is current after the mod, you may be able to pay it outside the plan. If you got a fair modification it is one good event for your family. The law is so watered down it will help only banks avoid modification as if the change in law never took place. Be thakful the loan company worked out a modification for you, I guess.

Originally Posted by gray517

and do not have the funds to even try and settle, was a little hopeful about the cram-down thing and reducing principal but with the new restrictions on bill won't help us that way since we already got mod to permanently lower rate and payment is below the targeted 31%, would just like to clean everything else up and try to move forward, thank you for your input.

If you file, the settling for owed payments can be determined between the parties. I believe the backpayments can be paid through the plan length. One car was current while the other was recently repossessed, we just let it go back in full satisfaction since it would add an additional $250 to our monthly repayment plan which we could not provide for. I know you can pay what is called pre-petition over the length of the plan for home loans.
I want your financial situation to improve, but for now, prevent it from falling further behind. Once you file the late payment charges on the credit cards stop as well as overlimit fees. The protection is designed to help people start over or work their way out of debt getting out of control from income changes which make you less money in than money owed out, Basically when that happens you are insolvent whether you face up to it or not.
Good luck! I hope my thoughts are helpful for your choices you will have to make.

[franklinco]

Originally Posted by lugson

franklinco,

Thank you for your input. We are currently filling out the mentioned forms. It just scares us to think we could be left without the ability to create an emergency fund. We have also spoken to a second bk attorney who has given us some possible debt negotiation alternatives. We will see where we end up in the next couple of months. Thanks again for the info!

Depending on your situation the debt repayment outside of BK law may be helpful. But for repayment plans outside the creditor does not have to participate and I am not sure how much the agency gets as a percentage. At least make sure the agency is above board. A good choice might be to go to one that is approved by the DOJ so if the debt is too much for compromise, you can get the required pre-filing councilling. It sounds like you are teetering so the councilling could determine a workable plan outside BK and you can recover without the complications of BK. They could not figure out where to come up with the needed $1400 in my case, so choices were limited. For borderline situations the credit councilling or debt resolution agency may work. Be careful for companies who may be out to sink you further though. A lot of unscrupulous are sub-bankers where they prey on your desperate situation to further complicate your situation.
Good luck to you with your choice you make. Something needs to be addressed so at least you will know which way would work out best for you after becoming familiar with the forms and what they require you to do.
I'm glad to try to help. Not being a lawyer and studying the law, it is only to pass on what I have experienced, not pushing you either way.

[lugson]

franklinco,
The BK attorney we spoke to regarding the chap 13 would be the person doing the debt negotiation. Although, I do not believe this is an option for us. He had mentioned you need to have he funds in hand to settle the debt for less - and we won't have that. So it looks like chap 13 for us if we do not get enough help on the mod.
I can appreciate what you are telling us about having an above board agency. We did a debt consolidation last year which I do not believe was in our best interest. On our part I think we did it out of desperation, and now we really see no end to it. Live and learn.

[gray517]

lugson
sorry for buttin in on your thread, didn't want to start a new thread for 1 question.


franklinco
thanks for your help!

[lugson]

No problem Gray - I have learned a lot from your comments and story posted in the CW section and all info is good info as far as I am concerned.

[franklinco]

Originally Posted by lugson

franklinco,
The BK attorney we spoke to regarding the chap 13 would be the person doing the debt negotiation. Although, I do not believe this is an option for us. He had mentioned you need to have he funds in hand to settle the debt for less - and we won't have that. So it looks like chap 13 for us if we do not get enough help on the mod.
I can appreciate what you are telling us about having an above board agency. We did a debt consolidation last year which I do not believe was in our best interest. On our part I think we did it out of desperation, and now we really see no end to it. Live and learn.

I hope things go through with the modification to the loan. At least you trying for a modification before seeking bankruptcy protection should qualify you for the law that might pass so the judge could modify the loan in chapter 13.
If they don't modify the loan and if changes in the BK laws are not corrected, the home loan would be a runaway debt, meaning the terms which lead to the problem would still be there. Your other debt can be modified according to your ability to pay so chapter 13 will at least help you to be able to get by better than you presently are able to.
Right now the only solution to bad mortgages is to surrender it in full satisfaction of the debt, preventing the loan companies from collecting any deficiencies. If the lender had any sense of economic sense rather than their current take a loss, foreclose and then pursue a deficiency judgment, we would not be in this mess.

[franklinco]

Originally Posted by gray517

lugson
sorry for buttin in on your thread, didn't want to start a new thread for 1 question.


franklinco
thanks for your help!

You are welcome. I hope it helped to help you make the best choices for your family.

[franklinco]

I just received an article from bankruptcylawnetwork which explains the intricacies of the filling for chapter 13 related to the trustee who will distribute your wages needed for repayment in the plan. There are two not clear points regarding the article. The first is related to the income. They look back at your previous income for the previous 6 months, divide it by six, then multiply it by 12 to come up with your theoretical income.
Interesting is the provision for emergencies which some trustees allow you to provide for. The articles on this site are helpful to me. I originally found the help for answering questions by searching for HR 3609 so have gotten great information for a few years from this source. I hope this helps answer the questions concerning the emergencies and how the plan is determined.

The article:
Clients always ask how much their Chapter 13 Plan payment will be, and how much they will have to pay the Chapter 13 Trustee each month. This isn’t an easy question to answer, since there are four different tests used to determine the number: the Means Test, the Chapter 7 Liquidation Test, the Disposable Income Test, and the Minimum Payment Test.
The Means Test is a formula imposed by Congress in the 2005 BAPCPA amendments, and the numbers used don’t necessarily have anything to do with reality. Basically, you average your household income for the past six months, multiply by 12, and compare that number with the median family income for a household of your size. If you’re under, the Means Test requires a $0 payment. If you’re over, you’re allowed certain deductions, which determine your payment.
The Chapter 7 Liquidation Test doesn’t mean that your assets will be liquidated, or sold. It simply means that you look at what a Chapter 7 Trustee could get if he/she were to sell all your non-exempt assets. For example, if you would have $60,000 in non-exempt equity after your house were sold (an increasingly rare event in this economy), you would have to pay your creditors at least $60,000 over the term of your Chapter 13 Plan. If, as is often the case, there are no non-exempt assets with equity, the Chapter 7 Liquidation Test requires a $0 payment.
The Disposable Income Test looks at your actual income and your actual and projected expenses. You take your net income (listed on Schedule I) and subtract your actual and projected expenses (listed on Schedule J). Since you are required to pay all of your disposable income into the Chapter 13 Plan, the number that results is the minimum Chapter 13 Plan payment (although some Chapter 13 Trustees will allow you to pay a bit less to provide for contingencies and emergencies).
The final test is the Required Payment Test. This test looks at the claims that must be paid in full through the Chapter 13 Plan (attorney’s fees, priority taxes and domestic support obligations), the amount of secured debt (typically mortgage and car) arrearages, the percentage payment to the general unsecured creditors, and the Chapter 13 Trustee’s commission, and adds these numbers up. The result is called the Plan Base: it is the number that must be paid through the Plan. Assuming that none of the other three tests require a different result, dividing this number by the number of months in the Plan gives you the monthly payment.

[lugson]

Thank you franclinco,

I will Google those sheets - this will be good to do before we meet with the lawyer the second time. I really appreciate your information!

[snapple candy]

Considering BK? After reading details of Fannie Mae program set up under Obama plan, I am seeing some glaring details. Check out the link that *** posted in the Chase section of the forum: https://www.efanniemae.com/sf/guides...9annlenltr.jsp for in-depth blow by blow. If this is what Fannie is doing, most others will be doing similiar programs. If you want a principal reduction, you may only see it done in BK and I am wondering what status of HR 1106 is in senate?
I have to say, this is a creative approach on how to handle the lost value in many of our homes.We'll just forbeare all that lost non-existant equity, not charge you any interest on it....and we hope you stay in the house long enough to gain it back so you can pay us what you owe us.
The big question will be, if you turn down such a deal from a lender, will a BK judge still do a principal reduction?

In essence, it appears to me, any portion that you may want considered as a principal reduction will be rolled into a balloon payment (so you can meet the 31%) that will not be amortized or interest applied and will be due at time of sale of property.

An excerpt from Fannie's guidelines:

Step 4: If necessary, AFTER capitalization of arrearages, reduction of the interest rate to the 2.0 percent floor, and extension of the amortization period to 40 years, the servicer must provide for principal forbearance to reduce the payment ratio to 31 percent. The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the
borrower’s sale of the property, payoff or maturity of the mortgage loan. The modified interest bearing balance (i.e., the unpaid principal balance excluding the deferred principal balloon amount) must create a current mark-to-market LTV (current LTV based upon the new valuation) greater than or equal to 100 percent if the result of the NPV test is negative. The principal
forbearance amount is non-interest bearing and non-amortizing. A principal write-down or principal forgiveness is prohibited on Fannie Mae mortgage loans.

[Moe Bedard]

If you were offered a modification that fell within the guidelines of the modification program.............according to the plan.......... it seems like you wouldn't just be able to turn it down and go the bk route........as the modification you are given would be considered an option.


How Judicial Modification Works:

Appropriately tailored bankruptcy legislation provides a mechanism for homeowners who are out of other options to file for bankruptcy and implement a responsible plan to pay the debts that they are able to pay. After borrowers have tried unsuccessfully to obtain affordable loan modifications from their lenders or servicers, in the appropriate circumstances, a bankruptcy judge should be able to reduce the outstanding principal balance of a primary residence home mortgage loan to current fair market value—just as is done with vacation homes or investment properties--when a person has no other options.

[snapple candy]

***,
Thanks for you view of this. Please correct me if I am not understanding this correctly. If the guidelines allow for the lenders to take the lost equity (the amount we are underwater) and basically set it aside interest free for a period of time such as many years until the house sells (hoping that the property regains the lost equity), you may not have any option but to accept it and it prevents you from qualifying for a principal reduction in BK?

This option obviously does not allow for current fair market value to be applied. It allows for the lender to defer the portion that is above current market value up to the owed amount on the property.

Who defines "affordable loan modification" and whether a deferment of a portion of the principal balance (interest free) until end of loan period or pay-off is an "option" that has to be considered before going BK route?

I see this as principal balance reduction (in BK) vs principal balance deferment with lender. Many would not consider this an option if seriously considering BK. I see this as a loophole for lenders not to take a hit and avoid doing principal reductions to adjust for current fair market values. I suppose none of us ever thought they would willingly do principal reductions. I imagine the investors like the option that someday they will recover the full amount of the loan without taking a loss by doing PBR in this current market.
I dont recall the Obama guidelines detailing this type of deferment as an option. Is this Fannie Mae's adaptation?

[Moe Bedard]

the programs 31% target mortgage payment versus gross income is what they are using to define affordable modification terms.

anything else remains to be seen in regards to the utilization of the bk according to the plan.

[franklinco]

Originally Posted by lugson

Thank you franclinco,

I will Google those sheets - this will be good to do before we meet with the lawyer the second time. I really appreciate your information!

Being prepared somewhat and a little more familiar with the process should allow you to voice your concerns better to help you make the most viable plan initially.
I originally intended to file 7 so was not up to the process or peculiarities beforehand. I am sure you will be able to make a better arrangement now with the prepping for the case.
Best of results for your recovery plan.