Deciding On BK, CHAPTER 7 Or 13, Advise??

Question:
My wife and I are concidering filing for Bankruptcy. We have explored the options of debt management and companies that will "settle" your debt for about $.40 on the dollar, which seemed like a fair option at the time. We currently have about $30,000 in unsecured debt (CC) no outstanding loans, and are current on the mortgage. Our home is worth about $196,000 with a Mortgage of $156,000. We also have a truck that we are about $8,000 upside down on, with MONTHY Payments of $450.00, which we can no longer afford. Our debt to income ratio is barely positive. As others have said, they feel obligated to pay some of the debt back, so we explored those options. However, as we make payments, we never get anywhere, and have stopped completely. Can a CC company, when they notice you have stopped making payments, file a suit or claim against you, before you can file BK? Does it matter if they do?

Answer:
Depends on how much time you're looking at. In most states, from the date of filing of suit until judgment takes a minimum of about 90 days. You didn't say what state you are in, which makes a difference in terms of the amount of equity in your home that would be exempt. If your home has an approximate market value of $196,000 it would be worth less than that to the bankruptcy trustee after selling expenses (real estate commissions, legal work, etc). I am not sure, but I think that if you stop paying your mortgage and real estate taxes, that will increase the balance due on the mortgage and taxes and lower your equity -- which might enable you to keep your home through the bankruptcy process. (I'd be interested to know what others think about this last point -- does it make sense, is it legal, etc?). I am not an attorney and you should definitely talk with a few bankruptcy attorneys in your area before doing anything. Many provide free initial consultations.





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