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  1. #1
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    Oct 2010
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    Question Preparing for Chapter 13 Bankruptcy

    My question involves bankruptcy in the state of: TX

    In 2004 we filed a Chapter 7. Unfortunately we are in Homes Sales and are sinking again.

    My husbands vehicle needs replaced, can we do this a month before filing? Do we have to trade in one vehicle?
    I'm worried about credit approval after we file.
    The vehicle my husband has now, we would like to give back to the bank. Can we do this and settle at BK?

    Will a Chapter 13 prevent a 2nd Mortgage Lawsuit or Judgement ?
    In Feb 2009 our home was Foreclosed. We had a 2nd Mortgage. I don't think there was a shortage for the 1st mtg . However we have received a letter from the 2nd, for a swimming pool, that we have until November 1st , then they will file a lawsuit $49,000.

    Do charged off credit cards and 2nd mortgages need to included in the payoff of a chapter 13? ~ Thank you in Advance for any Ideas or Opionions

  2. #2
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    Sep 2005
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    Default Re: Preparing for Chapter 13 Bankruptcy

    When you say "Do we have to trade in one vehicle", I'm not sure what you're getting at. If you qualify for credit to buy a new vehicle, you qualify for credit to buy the vehicle.

    As the new vehicle loan would be a secured debt, it should present fewer issues in bankruptcy than running up unsecured debt shortly before filing; but it could be viewed as an effort to run up debt to avoid paying back your creditors over the course of the Chapter 13 plan. You are generally better off waiting @90 days, although experiences will vary. You should really discuss your strategy with a bankruptcy lawyer before proceeding. An initial consultation should be free. Note that buying a car before bankruptcy can be a good idea, as it can be difficult to get approval to buy a car during a Chapter 13 plan, your credit will be harmed by the bankruptcy filing, and the terms of your car loan (if poor, e.g., an unduly high interest rate) may be subject to modification as part of the bankruptcy.

    Your deficiency from a prior foreclosure will be treated as an unsecured debt, and thus should be discharged in whole or in part through your Chapter 13 plan. Credit cards, similarly, are unsecured debt. Are you suggesting that you might try to keep some debts out of your Chapter 13 plan and repay them in full? I'm not sure why you would want to do that.

  3. #3
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    Oct 2010
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    5

    Default Re: Preparing for Chapter 13 Bankruptcy

    Quote Quoting Mr. Knowitall
    View Post
    When you say "Do we have to trade in one vehicle", I'm not sure what you're getting at. If you qualify for credit to buy a new vehicle, you qualify for credit to buy the vehicle.

    As the new vehicle loan would be a secured debt, it should present fewer issues in bankruptcy than running up unsecured debt shortly before filing; but it could be viewed as an effort to run up debt to avoid paying back your creditors over the course of the Chapter 13 plan. You are generally better off waiting @90 days, although experiences will vary. You should really discuss your strategy with a bankruptcy lawyer before proceeding. An initial consultation should be free. Note that buying a car before bankruptcy can be a good idea, as it can be difficult to get approval to buy a car during a Chapter 13 plan, your credit will be harmed by the bankruptcy filing, and the terms of your car loan (if poor, e.g., an unduly high interest rate) may be subject to modification as part of the bankruptcy.

    Your deficiency from a prior foreclosure will be treated as an unsecured debt, and thus should be discharged in whole or in part through your Chapter 13 plan. Credit cards, similarly, are unsecured debt. Are you suggesting that you might try to keep some debts out of your Chapter 13 plan and repay them in full? I'm not sure why you would want to do that.

    No , I'm not suggesting we may try and keep any debts.
    We have seen one Attorney, however we went in unprepared, Now I'm loaded with questions after reading for 6 days. The next attorney we will see has ask us to bring in tons of paperwork. So hopefully we can clear up these questions.
    I will discuss trading vehichles with the attorney.

    Thnak you for your help.

  4. #4
    Join Date
    Oct 2010
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    5

    Default Re: Preparing for Chapter 13 Bankruptcy

    TX---We had a consult with our 2nd attorney. He said we don't make enough money to file Capter13. There is not enough income left to repay debts. I wonder why the first attorney didn't see this. Unless we inflated our debts to much.
    We purchased our home July 2009 for a little over $250,000. A realtor did the comps for us. The market value now is $192,000.
    Question---If we find we did do our numbers wrong and can file Chapter 13,
    will the difference in what we owe and the market value be negotiated.

  5. #5
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    Sep 2010
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    Default Re: Preparing for Chapter 13 Bankruptcy

    Quote Quoting sasyone
    View Post
    We purchased our home July 2009 for a little over $250,000. A realtor did the comps for us. The market value now is $192,000. Question---If we find we did do our numbers wrong and can file Chapter 13, will the difference in what we owe and the market value be negotiated.
    Any attempt to reduce the principal of the mortgage will be between you and the lender. The bk court does not have the authority to modify the rights of a lender who is secured solely by the debtor's principal resdience. Being undersecured (as opposed to a wholely unsecured 2nd) is still "secured".

    Des.

  6. #6
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    Oct 2010
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    Default Re: Preparing for Chapter 13 Bankruptcy

    Quote Quoting despritfreya
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    Any attempt to reduce the principal of the mortgage will be between you and the lender. The bk court does not have the authority to modify the rights of a lender who is secured solely by the debtor's principal resdience. Being undersecured (as opposed to a wholely unsecured 2nd) is still "secured".

    Des.
    Des, I don't understand this " Being undersecured (as opposed to a wholely unsecured 2nd) is still "secured".

    Is it I may be protected for a 2nd mtg but not the first mtg?

  7. #7
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    Sep 2010
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    Default Re: Preparing for Chapter 13 Bankruptcy

    Quote Quoting sasyone
    View Post
    Des, I don't understand this " Being undersecured (as opposed to a wholely unsecured 2nd) is still "secured". Is it I may be protected for a 2nd mtg but not the first mtg?
    In a Chapter 13 or Chapter 11 if, and only if, there is absolutely NO equity in the home after subtracting out the amount owed on a 1st position mortgage, you can "strip off" the second lien (and, if you have, any liens junior to the 2nd). The lender becomes a general unsecured creditor like a credit card. "Lien stripping" is routinely done but not in Chapter 7's.

    The difference between "unsecured" and "undersecured" is as follows:

    Example #1

    Property value $200,000.00
    1st Mortgage $180,000.00
    2nd Mortgage $ 50,000.00

    The 2nd is secured up to $20,000.00 and "undersecured" by $30,000.00 (200-180=20 leaving 30 unsecured). In this situation, since there is some equity to secure the 2nd lien, if the property was your primary residence you would be stuck dealing with the 2nd per the contract you signed if you wanted to keep the property. The bk court would not have the authority to reduce the debt.

    Example #2

    Property value $200,000.00
    1st Mortgage $290,000.00
    2nd Mortgage $ 50,000.00

    The 2nd is entirely (wholly - sorry about prior spelling) unsecured as there is no equity after the 1st.

    As it relates to the 1st mortgage in the 2nd example. This lender is "undersecured" by $90K HOWEVER, just like the 2nd mortgage in Example #1, if the home is your primary residence, the bk court would have no authority to reduce the debt.

    I hope this explains it.

    Des.

  8. #8
    Join Date
    Oct 2010
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    5

    Default Re: Preparing for Chapter 13 Bankruptcy

    Des - Thank you , I get it, finally.

    We reworked our numbers and the 2nd attorney we used was using "net" figures. Anyway, the first one was correct.
    My issue is they won't return phone calls. So should I be leary of hiring him now? My gut says yes.

  9. #9
    Join Date
    Sep 2010
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    478

    Default Re: Preparing for Chapter 13 Bankruptcy

    Quote Quoting sasyone
    View Post
    My issue is they won't return phone calls. So should I be leary of hiring him now? My gut says yes.
    Number 1 complaint about attnys. Shop the market.

  10. #10
    Join Date
    Nov 2010
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    Default Re: Preparing for Chapter 13 Bankruptcy

    I remember when a friend went through this a bankruptcy. They came back with a filing cabinet worth of paperwork. They also had a notebook full of questions. Unfortunately I may be going through the same thing soon. God, I hope not, but we'll see. My only advice to you would be to really shop around for your lawyers and make sure you're getting someone that doesn't "turn your guts."

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