Okay about 8 months ago I filed an induvidual Chapter 13 Bankruptcy to avoid foreclosure. My spouse did not file and we are 8 months into a 36 month chapter 13. Since I was the lone filer my pay checks are deducted $487.50 bi weekly for a total of $975 per month. This mostly goes towards the past due mortgage which was in foreclosure prior to my filing, the remainder goes to a used auto loan and some revolving accounts that were in my name.
Recently my wife decided that she wants a divorce. However with the complication of the Chapter 13 that is undischarged for another 18 months it really complicates things. Her income is very close to mine, so I can only hope that the trustee assigned to my case will review my situation and allow me to reduce the current $975 per month since this was based on our joint income prior to divorce.
As for the mortgage which is a joint account between us, I am concerned as to our options to give up the home as nie ther of us want to be attached to the property any longer than necessary. When in Chapter 13 I don’t think you quailfy for a short sale, deed in lieu , or will I have to stop making the payments to get the attention of my trustee.
If the property does fall out of my hands then will my former spouse or I be responsible for the $20 to $25 thousand in negative equity. If so , could I include this on a modified chapter 13 plan that would allow me to pay all parties back but also take a reduced amount each month since I will be a one income family.
The last stick in the mud is a second mortgage of about $13,000 which was charged off two months prior to my filing bankruptcy. This loan is the only other joint account my former spouse and I have / had. As I mentioned this loan was charged off about two months prior to my filing for chapter 13. However this loan is not included in my chapter 13 plan due to an arrangement / offer given to me by the second mortgage bank. They agre ed to zero out the interest on the remaining $ balance, as well as voluntarily striped their lein from the orginal troubled property.
I have been paying them $500 per month for almost 10 months now and have no plans to stop since they were so gracious to write off all interest and release the lein from the property. Maybe since this is a joint account the divorce attorney can arrange it so we each send them one half. Okay I know that was a lot of information and I thank you for even trying to understand my unique situation. Since my background info mentioned several problems I am facing I will list each question below seperatley. Thanks again and for any advice or ideas you may have before I contact the bankruptcy attorney as well as a divorce attorney. This is occuring in the state of Georgia just in case there may be a special law or rule.
My questions are :
1. Since we are seperating and I was the lone bankrupt one will my monthly wage deduction of $987 be reduced since we no longer have combined incomes?
2.As part of the reduction or modification on the Chapter 13 what are my options to give up the house as I cannot really afford it alone, and we do not want a joint property?
3.If property is given up can the difference or negative equity owed on the property be charged back to us and if so can I include this on a modified chapter 13?
4. Can you even change a Chapter 13 to exclude a creditor (in this case the mortgage company) in order to get out from under the property, not sure if short sales, deed in lieu are options once one party is in bankruptcy or if it would be an automatic foreclosure??? Keep in mind my spouse is not in a bankruptcy and the second mortgage lien was stripped so the propety although underwater only has one lien which may speed up any short sale activity???
Thanks – Jason”
I’d love to tell you I’ve seen many situations like this end well. They typically don’t.
In the divorce you will both now be responsible for paying to live some place. It only gets harder financially when people split and then have to make it on their own. That’s why divorce is a leading cause of bankruptcy. I can’t really see you being able to afford the payment in the chapter 13 and keep a house you can’t afford.
I would suggest to let your bankruptcy attorney know what is going on. They may suggest you default on the house, let the bank foreclose on it, convert to a chapter 7 bankruptcy and discharge all of your liability for the joint debt. That will give you a legal second chance and fresh start.
Otherwise you will get divorce and come to an agreement on how the two of you will deal with your joint obligations. But that agreement is between the two of you and has no impact on your creditors. You may be divorced but you will remain jointly liable for all joint debts. If you ex-wife doesn’t pay, they will come after you.
Go talk to your bankruptcy attorney, please, and do it as soon as possible.
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