Mike wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Dear Steve,
I used to own my own construction business during which time I built a new home for me and my family. Everything went downhill so fast that we lost our old home to foreclosure because it wouldn’t sell and I was making payments on the construction loan for the new house while my phone still wasn’t ringing.
Because of the foreclosure no bank would finance the perm loan and I am still paying 9.75% interest on the construction loan and it has matured. I used up all of my savings and I tapped into family and credit cards to help but things have only gotten worse. I had to get a job working for someone else and my paycheck isn’t enough. I have a wife who works and 3 kids and I want to keep the house for obvious reasons.
Should i file for bankruptcy or will it do more harm than good? And if I do should I file Ch. 7 or Ch. 13
Mike”
The Answer:
Dear Mike,
That determination is best made in conjunction with the bankruptcy attorney when you talk to them.
I think the underlying issue is if you can afford to keep the house, at all. You would need to be able to make at least the regular mortgage payment in bankruptcy to stay in the home but that might be feasible if your other debts were reduced.
However, I am worried that the bridge loan has reached maturity and you have not been able to refinance the mortgage or convert it to a permanent loan. I suppose it would be possible for the bank to call the note due in a lump-sum and if they do, you’re screwed.
So, the path to follow is going to have to be based on a conversation with a local bankruptcy attorney. My suggestion is that you give a few a call and then make an appointment with the office you like the most. Good communication and confidence in the abilities of the office is an important consideration when selecting an attorney to work with.
After you go in and talk to the attorney, don’t feel pressured to make a decision that day about bankruptcy. Take the information home, discuss it, sleep on it and then move ahead confidently.
