Bankruptcy

[BeardedOne]

Updates:

7, 11 or 13?

Chapter 11 is only for corporate/business, which is why so many people know of it. K-Mart, Sears, GM, etc., all filed under Chapter 11. My particular issue is with 7/13. I should have specified.

The two available to individuals are 7 and 13. Chapter 7 is for the most serious cases and has a pretty long bunch of high and narrow hoops to pass through to qualify. Best example would be someone who lost their job, was in a car wreck, has mucho uninsured medical expenses, and is being ditched by his fifth wife because she can't put up with his drug habit and gambling losses. The court is allowed to seize and sell certain assets to create funds to pay down debt, but one home, one car, 401ks, and a limited value of personal assets (Clothing, furnishings, your mom's treasured souvenir spoon collection for example) are protected.

I don't qualify for 7 because I make too much in my base annual salary and my debt load is difficult, but not impossible to maintain. I just need some short term solutions and long term tweaks to get on my feet again.

Chapter 13 is for someone like myself who has hit a bump in the road and needs a little help getting the tires changed. Essentially, it is a restructuring of debt that puts it more in line with your current ability to pay. Typical examples are people who have had sudden or serial changes in their finances that have either greatly increased the debt or reduced the income (Or both), causing a squeeze. Things that can cause this are family issues (Death, illness, divorce), changes in income (Temporary layoffs, reduction in pay, etc.), and the ever malicious 'series of unfortunate events'. I fall into the last category with a number of events and circumstances that include a reduction in salary, unexpected/uninsured home adventures, some stale investments, etc. The only reason that I'm researching bankruptcy is because one of the primary players, and a leading cause of the issues at hand, has been stonewalling me for months, refusing to negotiate.

In Chapter 13, all of the income and assets are examined and weighed against all of the debt and operating/living expenses. The process is grueling and involves hundreds of pages of documentation and, in my area, can cost about $3k in fees. The court formulates a payment plan and has the authority to adjust or eliminate certain kinds of unsecured debt (Installment loans, credit cards, but not secured debt such as home, car, etc.). Once the numbers are in place, the court appoints a trustee and you are assigned a payment plan wherein you make the payment directly to the trustee and they, in turn, pay those owed. Consider it a court-created refinance plan that consolidates everything into one, low monthly payment. That usually lasts for about five years.

I can't file for that, either.
The reason is that I still have not gotten any figures from the two banks that have been dicking around with me since January. Until they come up with solid numbers to add into the formula, no plan can be developed. One has been working on it, but taking forever, while the primary has been refusing to do anything up until a couple of weeks ago when they finally succumbed to logic and offered to modify the note.

In explaining all of this to me, the bankruptcy attorney looked at the paperwork I'd brought with me and started to laugh, seeing the dark humor that is the core of the issue. As with others, she was both mystified and horrified to believe that I was even sitting in her office, let alone considering bankruptcy, when some basic negotiation should have prevented the problem from occurring in the first place. I said as much while waving my last good credit report around her office like a maniac, almost shouting as I pointed at all of the pretty green dots that showed my once-spotless credit history. From a stellar FICO score of 742 to a sinking 500 in less than a year because of asinine bank policy and bad advice from said banks.

As of Wednesday July 15, one has approved a modification (But has yet to give me any firm numbers) and the other has put it into the pipeline with results expected within the next week. Based upon those numbers and the terms of the modifications, I may not even have to file. Either way, it's still going to take years to repair the damage.

If anyone's curious: Citi Group/Citimortgage. Avoid them at all costs. To give you an idea of how they operate, I have been talking to them almost daily for the past six months and within minutes of hanging up, another agent calls and asks "Would you like to talk about your mortgage?". Not a one of them had a clue and you never got the same person twice. The five most recent calls (Received after the modification with the last one being at 9:50 AM today/Sunday) I answered the above question thusly: "I assume you're calling to congratulate me on having had my mortgage modified on July 15th. Thank you, but you can stop now. No, really, I have to deal with morons all day at work, I surely don't need them calling me at home. B'bye!"

[LibertyHarkness]

been and got the tshirt on Bankruptcy

[BeardedOne]

A bunch of lawyers, law clerks, and repugs are in tears tonight.

The first, and most important battle has been won. The primary lender finally caved and came back with a rather sweet modification proposal that not only stopped the pending foreclosure, but puts me on the high road to early pay-off.

Called a step-modification, it drops the interest rate from an already reasonable 5.75% to a shamefully low 2.0% for five years, moving delinquent amounts to the end of the note and eliminating many of the fees and penalties. After the first five years, it steps up to 3.0%, then to 4.0% after the next five and for the balance of the note, which has been extended from 30 to 40 years. With aggressive payments in the first five years (I was already attuned to a $600 over-payment and now can do =DOUBLE= payments), the ramp-ups will have little effect on the overall picture and, when all the math is done, the numbers will more than make up for the fiscal damage caused over the past two years.

Foreclosure averted, many drinks bought at the cafe. Yay, me!

I'll be talking to the primary lender's local attorney and the sheriff's office on Monday to bring them up to speed. The final paperwork went out tonight and copies should be back by next Wednesday.

The war's not yet over, as I am still fencing with the equity bank over payment levels, but the tide is definitely turning. I am also still mulling the possibility of a hardship withdrawal from the 401k. Though no longer an urgent necessity, I am crunching the numbers to determine whether or not it can serve as a permanent cushion against this sort of thing ever happening again. As it is, certificates of deposit that yield an anemic 2% are still doing better than the markets and are far more liquid. I just have to justify the 10/10% tax/penalty fees on such a massive withdrawal (As well as six months of lost matching funds and the long-term loss of growth income).

Fuck bankruptcy. When it takes $3k in fees to file over a mismatch of less than $3k in debt/income ratio, it's pretty damned obvious that intelligent, responsible people should never even have to consider it.

[flabbybody]

It's no wonder why so many people who have negative home equity are simply walking away from the loan and dealing with the bad credit consequences for a few years.
B1, I admire your perseverance at avoiding foreclosure. Plz keep this thread going with your continuing efforts.
good luck

ps. The 10% early withdrawal fee on your retirement account can be waived under situations like your's

[Helvis2012]

Why not try something new instead.....pay your bills.

[bat1]

Why pay your bills?

Just keep a shotgun at the door and don't answer the Phone!