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Guest · Posted: Wed Jul 23, 2008 11:44 am Subject: Bankruptcy Advice

We've got 60k left on a mortgage, but home equity line is used up at 150k. about 30k in cc debt. Barely making it. Making the payments on time, but barely over the minimum.

If we file for bankruptcy will we lose the house? What would you recommend? Thanks.

Essentially I used the HELOC as an ATM card. Didn't help that I used thousands of it for a gambling habit which thankfully I've gotten over. Haven't gambled in a year.

Posted: Wed Jul 23, 2008 11:56 am Subject:

Congratulations on recovering from the gambling addiction. The bankruptcy laws are stricter know and you have to pass a means test. If you file a Chapter 13 that should protect your home. I would suggest that you sign up for the free debt consult available here either online or calling the toll-free number and they will be better ablet to advise you.

There are numerous members on this site and will be able to offer suggestions for you. Good luck to you.

Posted: Wed Jul 23, 2008 11:59 am Subject: reply

the only way to keep the house and file chapter 7 is to reaffirm
that debt during the meeting of creditors.otherwise chapter 13
or as ladybug advises,you can get a debt consultation here.

Guest · Posted: Wed Jul 23, 2008 12:43 pm Subject:

Can I just reaffirm the mortgage and not the HELOC?

Posted: Wed Jul 23, 2008 12:46 pm Subject: reply

you will have to reaffirm both,forgot about the HELOC.

Guest · Posted: Wed Jul 23, 2008 1:11 pm Subject:

So essentially I'm stuck.

Posted: Wed Jul 23, 2008 1:15 pm Subject:

Actually, I just filed for Chapter 7 a couple of weeks ago, and our attorney advised that "we never reaffirm." Since our mortgages are higher than the value in our house, she said that if we don't reaffirm, and then something else happens later and we lose the house, then the mortgage company can't get a deficiency judgment against us (I think for the amount that is currently considered "unsecured" since there is not that value in the property). She did say that if we don't reaffirm, then the mortgage company may refuse to send monthly statements to us.

However, whether you reaffirm or not, you would need to keep both mortgage payments current or you would risk losing your house. If you file Chapter 7, as long as your mortgage payments are current and you keep them current, you would be able to keep your house. My attorney told us that if we filed Chapter 13, then we would have to make structured payments to our creditors, including the HELOC, for five years, but at the end of that 5 years, the balance of the HELOC would be discharged also. However, I believe that was only because our house is worth less than what we owe on our first mortgage. In your case, since you only owe 60K on your first mortgage, your house is probably worth more than that. Which pretty much brings you back to having to continue to pay both mortgages, I would think, if you want to keep your house.

Posted: Wed Jul 23, 2008 1:16 pm Subject: reply

if you are leaning towards bankruptcy and want to keep the
house,i'm afraid you are.there is no other way.either declare
chapter 7 and reaffirm those two debts or chapter 13.

Posted: Wed Jul 23, 2008 1:18 pm Subject:

I should have said that you would be able to keep your house in a Chapter 7 as long as your equity in it does not exceed your allowed exemptions. You would have to check your state exemptions to be sure. There are also federal exemptions, and I believe some states allow you to use either state or federal.

Posted: Wed Jul 23, 2008 1:23 pm Subject: reply

i was trying to edit myself,it would depend on the value,amount
owed on the house,but i was told that any property still owed
on would have to be reaffirmed,that is why i chose not to file.
this was from a BK attorney in IL.i noticed some lawyers will
go about things like that differently.

Guest · Posted: Wed Jul 23, 2008 1:25 pm Subject:

Not worth filing a bankruptcy if we can't get the HELOC off of it. So basically sell the house or surrender it pretty much is the consensus here. Am I correct?

Posted: Wed Jul 23, 2008 1:33 pm Subject:

Have you looked at other options?

Is it possible that you could refinance your house and put the amount owed on both the first and the second into one payment? I don't know what your interest rates are, so I don't know whether that would make sense for you or not, but often a first mortgage will have a lower interest rate than a HELOC, especially if you do have equity in you home and you only refinance enough to cover the mortgages. That would keep your loan-to-value ratio low and usually give you a better interest rate.

Posted: Wed Jul 23, 2008 1:34 pm Subject:

I would recommend that you speak with a BK attorney who will go over your particular situation and help you decide what your options are. Although our members share their experiences, Bankruptcy is particular to each individual.

Some people may not qualify to file a Chapter 13 vs. a 7, and vice versa.

Posted: Wed Jul 23, 2008 1:35 pm Subject:

BK attorneys will usually give a free consultation.

Posted: Wed Jul 23, 2008 1:36 pm Subject:

Of course, if you are barely making the payments, then your debt-to-income ratio may be too high to be able to refinance. Or the lender may insist that you pay off the credit cards also in order to reduce the debt-to-income ratio. If you do that, and you include the credit card payoffs in the refinance also, then you are exchanging unsecured debt for secured debt, which is not generally considered to be a wise thing to do (but a lot of people do choose to go that route since it generally lowers your overall payments significantly).

Posted: Wed Jul 23, 2008 1:39 pm Subject:

Desperately is right. Most BK attorneys do a free initial consultation. When I checked with about a dozen of them in my area, they all offered a free initial consulation. Of course, most of them are going to advise you to file BK since that is their business. So you would still be wise to explore all of your options and know what choices you have other than BK before you meet with an attorney.

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