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  1. #1
    Join Date
    Jul 2007
    Posts
    2

    Default Financial Crisis From Job Loss

    Myself and my spouse were doing very well for ourselves. We had 2 homes, 1 that is rented out and the other that we live in, and also 3 cars that were brand new when purchased within the last 1.5 years. Then the dreaded bad news, my spouse lost her job, just last week. While both of us were working, we had no problems making our payments on time, and we currently have a 750 average credit rating. As of 1 August, all of that will go to heck because to make all our monthly payments, we will be -$1300. per month so some items are not going to get paid. We have an appointment to speak to an attorney next week, but questions are just eating us up. Can we give back to the bank 2 of the 3 vehicles and just include in a CHP 13 the difference? Can we let one of the homes go back to the bank and just include what the difference was in it also. Now, I understand that some folks mite say we are jumping the gun a lil bit by already looking at bankruptcy, but with the amounts of dollars we are talking about, we see no other way. Any suggestions ?

    Thanx

  2. #2
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: Just found out

    Why not sell the cars, sell the home, and pay off the loans?

  3. #3
    Join Date
    Jul 2007
    Posts
    2

    Default Re: Financial Crisis From Job Loss

    Because all 3 vehicles were purchased within the last 1.5 years, each on a 5 year note so we would be taking a loss on all of them. Also, the housing market is very bad around here. We had our primary home on the market for 6months recently, trying to sell it to build a new one. not one offer so we would be taking a loss on that also. No matter how we worked it, we were taking a loss, some ways larger than others. We feel obligated to pay back the money we said we would pay when we signed for everything. Just wondering what our options mite be

  4. #4
    Join Date
    Sep 2005
    Location
    Behind a Desk
    Posts
    98,846

    Default Re: Financial Crisis From Job Loss

    When a car is repossessed, the car is typically sold at auction. Then bank then pursues you for a deficiency. A car sold at auction will fetch a very low price as compared to what a car will sell for in a private sale. A car you might be able to sell to a private buyer for $12,000.00 might fetch $8,000 or less at auction. If you owe $15,000 on the car, the question becomes are you better off covering a $3,000 shortfall in order to complete the private sale, or a deficiency of $7,000 or more (plus repossession and auction fees) if the lender repossesses and auctions the car.

    Your bankruptcy lawyer can also inform you as to whether your district follows the majority rule that the surrender of the car during bankruptcy proceedings can satisfy the lien, or the minority rule that will still stick you with the deficiency. Before you know that, it makes no sense to incur a deficiency judgment prior to bankruptcy.

    Similarly, with the foreclosure of a house, you stand to lose any equity interest you have in the house. You chose not to tell us your state, so you would have to check to see if your state permits deficiency judgments on foreclosures. Again, your lawyer will be able to tell you that.

    By letting this happen through foreclosure and repossession, rather than handing the sales yourself, you could end up with a deficiency far greater than you would otherwise have to resolve, and you may not even enjoy significant savings through a Chapter 13 repayment plan. (Your lawyer will help you figure that out - how your debt load breaks down between secured and unsecured creditors, and what portion of your unsecured debts you are likely to end up repaying.)

    You may be able to "cram down" the mortgage on your home and income property, to the extent that they exceed market value, so as to have the excess treated as an unsecured debt. (You should not expect to be able to do this with the cars, due to the fact that they were apparently purchased too recently to qualify for cram-down.)

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