So we’re still alive and yes I have neglected the idea of posting to this blog. I initially thought it would be easy to share with you all of the experiences we were/are going through, but I’ll be honest Blogging is time consuming. My apologies to the people who signed up to my feeds, I have let you down. So here is my update for you.

Last week we paid the attorney $1,700, which is the remainder of the balance owed to him. We also had to buy a money order for $299 made payable to New York State. This is for the court or filing fee.

We could not go with the Chapter 13. I guess I’m kind of relived. I mean I/we spent the money and in good faith would like to repay every dime of it, even if settled for pennies on the dollar. We were presented with two options for the Chapter 13:

1. Take a 3 year payback. So as I understand this, the court will allocate a certain amount of our income to payback our creditors. During this time we would lose all federal and state tax returns and any other government checks (like the $1,200 tax rebate check we received today). Additionally (and this was a serious consideration for us), we would not be obligated to payback our second mortgage payment during this time. The attorney worked numbers and showed me that the monthly court payment over the three years would be exactly $11 less then my current monthly payment to the [second] mortgage. He also said that at the end of the three years if we could prove show that the house is worth less than the first and second mortgage combined, he could re-petition the court to include it in my Chapter 13. So basically, I “could” get out of that debt, but it’s not certain.

2. Take a 5 year payback. This option wasn’t as attractive as the first. We couldn’t include the 2^nd mortgage and we would lose our tax return checks for the entire time.

After going through the means test we learned that we were not qualified for the 3 year option and would have to take either the Chapter 7 or the 5 year plan. The thought of starting over fresh is just very attractive to us. So we filled out the paperwork with the attorney for the Chapter 7.

With regards to our home and will we be able to keep it when filing bankruptcy. The answer is yes. So here is how it works. Our house was recently appraised for $345,000. We owe $335k on the first mortgage and $43k on the second. So that’s a total of $378,000 that we owe on the house. Funny, we purchased it for $365k. Anyway…. The court would need to prove that we could sell our home for $100,000 more than the amount I owe. The attorney was funny at this point and said if they could get someone to pay that, we’d not only owe this disgusting amount, but we’d get paid $100k to move out. I agree. I’m comfortable with that.

So our next step is to wait for the letter in the mail from NYS Bankruptcy court, with our scheduled appearance date.

I will post more over the next week. I just keep looking at this blog and feeling bad that I haven’t posted to it in awhile. I thank everyone for your letters, posts and comments. I also beg you to tell me if you read something here that is incorrect. I do always post from my notes that I take while doing research or at the attorneys office. Some of the information I shared was out of memory.

That’s all I have for now.

Best,

- Average Joe