We have a 47,500 2nd, 40,000 unsecured debt, 130,000 student loans. The student loans are coming due next month and the monthly payment will be about $1500. if we file chapter 13 we can strip the 2nd because it is total unsecured due to the decreased value of our home. I would perfer chapter 7, so that any money we have would go toward the student loans. I think I can with Bank of American and the National Mortgage Settlement progarm to get some adjustments on the rate and balance on the 2nd mortgage. I have spoken with an attorney, and she thinks we should file chapter 13. Which option is best for our situation? Should I get a second opinion? Thank you!
If you do not feel comfortable with who you spoke with, or do not feel you received a clear explanation of all of your options, go ahead and meet with someone else, or even a few, until you feel satisfied and comfortable with your decision. Judges are starting to grant lien strips in Chapter 7 cases now too, but that is an unsettled area of the law just now, so may not be the best bet. Loan mods work great if you can get one, but take many months to finalize, and the filing of a bankruptcy case may cause you to have to start all over on a pending loan mod.
Call around to attorneys here on this site and know that if everyone is telling you the same thing, it is probably the best thing to do. I find that cases work more efficiently when the client is knowledgeable and on board with what is going on, so make it clear what your concerns are and your vision of your future is. Get all of your options, then make an educated decision as to which way to go.
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Usually most people actually do NOT have a choice between a 13 and a 7. To do a 7 you have to show basically no leftover income. To do a 13 you need leftover income to fund it. (In other words, when people "choose" between the two, often it is by changing their budget (and to give you good advice an attorney needs to know a real budget), and sometimes that is easier done on paper than in reality.
Additionally to answer your question we'd need to know your income to see if you pass a chapter 7 means test and also to calculate how much unsecured debt you'd have to repay in a 13.
We do handle both and can review the pros and cons if you wish. Our number is 404-768-3509.
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It has to be a judgment call, but here are three things to consider. if you now qualify to lien strip, and if housing prices stay flat, you might be able to settle the 2nd mortgage a year or more down the road for 10 - 20% of the loan value. But settlement is never a guarantee! I am also seeing clients who have stripped their 2nd mortgages change their minds about staying in the home.
Another thing to consider is whether any of your student loan debt will be repaid in a Chapter 13. In my jurisdiction, the student loan creditors get paid nothing unless you have a 100% plan.
Finally, what can you afford to pay? If your budget shows you have no money to put towards paying debts, filing Chapter 13 will become impossible. if you can qualify for Chapter 7, I would do so, with the understanding that down the road you could file a Chapter 13 not for the purpose of obtaining a discharge, but to manage the repayment of your student loans and to lienstrip that 2nd, assuming real estate prices permit it. This process is often called a Chapter 20 because 7 + 13 = 20. Hope this perspective helps!
I am guessing that you will see almost as many opinions as there are attorneys out there. In my view, assuming you are wligible for either one, the question comes down to whether you wish to stay in your home long term and just how far upside down it will remain after the second lien is stripped. If you want to keep the house you can make a reasonable plan payment for 36 months and discharge the $47500 of your second mortgage and keep your home free from that lien. To me that is a no-brainier. If, however, the house would still be too expensive or too far under water for you to be sure you will keep it then a chapter 7 is certainly a simpler way to go.
If you are unsure then I suggest a consult with another attorney for a second opinion. Good luck, whichever way you go.
Just as it probably took the attorney you met with about 20 minutes to explain your options to you, that's how long it would take here. Based on the simple information you posted here, the advice you got from the attorney you met with seems sound.
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You have received excellent information and suggestions from those who have already answered. I will not reiterate their points. However, I would like to suggest that you investigate income based repayment of student loans. It is not widely known and may be very helpful in the circumstances you describe. Just plug "income based student loan repayment" into Google and you will bring up the information you need.
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