Please contact an attorney and obtain a free consultation so that you are aware if what your options are. If you file a chapter 7 and you are not current on the mortgage, you run the risk of the house foreclosing shortly after completion. If you want to discuss further, contact our office for a free consultation so that we are aware of all the facts. With all facts and details you can receive some clarity on this issue.
I would take Ms. Martin up on her advice.
You also probably want a Chapter 13, depending on what you want and what you can afford.
The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: www.avanesianlaw.com for more information about my services.
You can surrender the house and discharge the debt on both mortgages.
I am not sure what you mean by "debt ratio". Your ability to file depends on total asset equity and total income. The size of your mortgages could be relevant, but only if you are still able to pay them.
If you are planning to move out, then your budget for housing should be the reasonable cost of your next housing.
The filing of the chapter 7 will eliminate the mortgages no matter whether you are behind are not. As to whether or not you would be able to count these on your budget could be a consideration for qualifying for chapter 7 in terms of the budget and means test. The means test gives a housing allowance which is reasonable, so that should not hurt you. As far as the budget, if the trustee objects to you taking the mortgages as a budgetary expense, it would be on a good faith basis. As you will be surrendering the home, you obviously will need to pay to live somewhere else, so it is a mater of calculating that expense and seeing if you would have income left over after your living expenses. Either way, you need to go ahead and have a bankruptcy attorney run your budget and means test, using the last 6 months of your income, to see where that puts you. An experienced bankruptcy attorney should be able to get this to work if you would have qualified for a chapter 7 with the mortgage payments. If you would not have, the attorney should be able to give you options, including some which would allow you to catch up on the house. Sit down with an attorney for a free consultation. If one already told you this about the house, find one who is willing to explain the issue more and find a way for you to fix it rather than one who just tells you what you can't do.
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Is your goal to keep or surrender the home in bankruptcy? If you want to retain your home, then filing a Chapter 7 will not help you. After filing the 7, if you are not current with the mortgage the lender will file a Motion for Relief from Automatic Stay and begin foreclosure proceedings at any point after that. You would need to file a Chapter 13 if your goal is to keep your home - the arrears would be in a payment plan lasting 3-5 years.
Filing a Chapter 7 will allow you to surrender the home and discharge both the first and second mortgages. Even after foreclosure the mortgage holder could not come after you for any deficiency.
I am happy to discuss your options with you. Please contact me for a free consultation.
A Chapter 7 can discharge mortgage debt. I am gathering that your question concerns the Chapter 7 means test and your budget, which may or may not include the mortgage debt depending of facts I do not have.
Without knowing all your finances, I can't tell you whether you can or should file chapter 7, if there are other options, or when is best to file. What I can say is that it is important to get advice quickly. I'd be glad to set up a consultation and if you'll mention that you have a free AVVO referral for consultation, there is no charge. It would help me to see your financials at that consultation (and I have a worksheet at www.glenashman.com you'd want to complete and bring to the free consultation).
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