Alternatives to filing Chapter 7 Bankruptcy

[Suddenly Home]

I need to be pro-active in solving my financial puzzle as time is running out before I will be late making my payments, if at all. As of now, I do not have a record of ANY late payments during my entire credit history.

My six investment properties have not sold, the pre-payment penalites prevent competitive pricing and the mortgage companies will not work with me until I am delinquent. Same deal on my credit cards, and the interest is now accruing at 29.9%.

Tomorrow I am meeting with an attorney who specializes in filing bankruptcies. Is this really the best way to go? Will I ever be able to get another mortgage, or get a credit card again if I file Chapter 7 ? (I'm not sure that this lawyer is not just looking for more business -- )
Any thoughts? :SM129:

[Suddenly Home]

No, I do not have the money or the reserves/means to repay these debts, right now --

[stallingsorg]

i'm not in the position asking question, or giving a advice! but i would like to make a statement.

first, stay calm and treat the situation like a professional.

contact your lender or mortgage company IMMEDIATELY. do not wait another day. you MUST call your lender and explain why you cannot pay your mortgage. there is NO avoiding this. you MUST call your lender and explain why you cannot pay your mortgage. there is NO avoiding this either.

your lender does NOT want to foreclose on your home. they have many programs called deferments, forbearances, and more to avoid taking your home and work with you if you give them the chance. mortgage lenders will rewrite your loans, give you a moratorium on payments, and more if you work with them. be honest about your situation.

a bankruptcy filing will NOT stop the foreclosure of your home. it can delay it for a few days or weeks at best. but you or someone else filing for bankruptcy is NOT a foreclosure solution. it does not work, ever.

cannot stress how important it is you contact your lender IMMEDIATELY when you even suspect you cannot pay your mortgage, even if the payments are current today.

[Debbie]

I can not stress how much Stallings' statement to be true.

Do not go to the direction of Bankruptcy. It will not help you in any way, shape or form. Every single people who have told me that they filed bankruptcies, they regret it because they were too emotional to consider other alternatives.

[joe]

The truth always,and why can't you sell.

[Ceres]

Could you do a refi on one of your investment properties, get a new credit card and do a balance xfer. Give us some info on your investment properties, some one here maybe interested. What kind of marketing has been done on your investment properties? Give us a little more info and perhaps someone here can give some helpful ideas.

Ceres
cereshomes@earthlink.net

[Ceres]

Do you belong to MCREIA?

Ceres
cereshomes@earthlink.net
John Y.

[Suddenly Home]

Thank you, Stallings, for your post! It made me realize that the Bankruptcy Attorney is looking for more business $$$. I cancelled my 'consultation' with him.

Also, I called each lender and professionally explained (although I practically had to SHOUT) my situation, for the 3rd month in a row. Told them that this time I REALLY MEAN IT... I AM OUT OF MONEY. Each lender is willing to work with me now. Geez. I could have saved a fortune on Tylenol.

I will post the information about my properties on this site, in the event someone is interested in buying one or more, quickly.
Can't thank you all enough for helping me with this, day by day.

[Debbie]

So glad to hear this!

Good things will come your way soon!

Keep the faith!

[SPIVALAW]

If you ask a surgeon if you need surgery or a barber if you need a hair cut, guess what the answer will be?

A Bankruptcy attorney dont make money turning down clients.

[didi768]

I see many are in FL like me yee haw. After reading all this, I realize I need to call my two mortgage companies myself and explain our lack of money and future need to foreclose if they can't work something out. Only, I don't live in either house so not worried about being homeless thank God. I'd like to save my credit cause it's excellent.
Now...where can I post MY houses for sale/rent? Craigs list is not working this time.

[Debbie]

Now...where can I post MY houses for sale/rent? Craigs list is not working this time.

You can create a thread, mentioning your properties.

Also, on the HOME section (click onto green button that says HOME--up above). Scroll down a little bit, look on the right brown side. Notice the "For Sale By Owner Real Estate". Click onto it.

[Suddenly Home]

Sorry to hear that you are in the same boat as I am (was). Lesson learned, as far as listening to aggressive mortgage brokers and taking on too much risk! Grrrrr.

Anyway, my mortgage companies would not work with me until I had missed a payment. It just about killed me to do that, but I was depleting all of my assets and equity either way to keep the investment mortgages current. Later I found out that that is exactly what the lenders want us to do -- give 'em everything we've got until we're tapped out. I only wish I had pulled the plug SOONER.

The second thing I did was to consult with a bankruptcy attorney (three different ones, for info purposes). THEN I could talk "short sales" with my lenders, mentioning my attorney. I haven't yet needed to use my legal services because all of the mortgage companies have agreed to do short sales. There was a lot of leg work to get things in order for the packages, but it was worth it to get out from under a hopeless situation. Right now all of my properties are under contract to close in July.

Whether I actually have to file Chapter 7 is in the balance. We'll see how things look in a couple weeks. I did find out that filing a bankruptcy action, although is NOT a GOOD thing, is better when done promptly rather than dragging things out with creditors -- especially if you have good credit now.
That way you can get back on track right away. As I said, we'll see ... :eek:

Good luck!

[Tantric Realty]

Would you mind telling how you got to this point? were you trying to rehab these houses, flip, or wholesale? were you landlording and the tenants bailed? just trying to understand what got you here.

Thanks,
Scott

[Suddenly Home]

In a word (or two?): Over-Leverage.

My properties were attractive rentals and were cash flowing -- until I took some terrible advice from a 'sub-prime mortgage' broker.

These consequences have given me some excellent on-the-job-training, however! Next time I will do things differently.

[DAM]

In a word (or two?): Over-Leverage.

My properties were attractive rentals and were cash flowing -- until I took some terrible advice from a 'sub-prime mortgage' broker.

These consequences have given me some excellent on-the-job-training, however! Next time I will do things differently.

what terrible advise did he/she give you?

are you a novice investor? more than 5 properties?

close to facing bankruptcy myself, i am just curious to know more details of your plight

[dealmaker]

Sadly to say, many of us have seen this before!

Some quotes from posters above:

In a word (or two?): Over-Leverage.

My properties were attractive rentals and were cash flowing

all of the mortgage companies have agreed to do short sales

Back in the early '80s there were a lot of REI folks who got into the same boat because we just KNEW that; prices would go up forever, therefor we were "smarter than the average bear to keep on leveraging", and that it didn't matter how much we paid for our money "tax breaks and inflation would continue to bail us out".

I knew people who went from owning 20 plus rentals to living in their car in less than 3 years.

I once PAID A BUYER to assume a loan on a negative cash flow property I owned. BTW, I bought that property because of the paragraph above. About the only thing that kept me from "building a house of cards" was my own conservative (financial) nature and my wife putting her foot down.

Within 2 years of paying the guy to buy that house I was actively buying in that neighborhood and within another 9 months I owned 3 houses in there. Within another 2 years I had built a portfolio of 16 rentals, but within another 3 years I HAD PAID OFF ALL OF THOSE WITH A MORTGAGE.

I'm going to repeat here some "words of wisdom" that I've stated on here before. I'm sure others will write back that I don't know what I'm talking about. That's fine, it won't affect my lifestyle at all!

1. If something has "great tax advantages" it's a BAD DEAL. In order to get "tax advantages" you have to be LOSING MONEY. If you "lose" $20K in one year, you get to REDUCE YOUR TAXES by your MARGINAL TAX RATE, ie; about 25%. You don't get a TAX CREDIT for the $20K, you just pay the government $5K less in taxes.

2. If you pay $20K in interest, you are PAYING the bank $20K in order to NOT PAY the government $5K. If you really want to BUY QUARTERS for ONE DOLLAR apiece, I'll be thrilled to sell them to you. We can make the deal as often as you want and keep it up as long as you want.

3. In order for LEVERAGE to work for you, the property you are buying has to be appreciating at a rate that is GREATER THAN the cost of the money. Since most of the US is NOT APPRECIATING, and many parts are DEPRECIATING now, doing anything with borrowed money is a fools game.

I noticed that one of the above posters was from SA TX. Within the past year I posted the same advice, mentioning that TX JUST DOES NOT GET APPRECIATION that many of the coasts do. And someone on here posted the (IIRC) "Business Week" or "Fortune" article about how great the SA appreciation was.

I pointed out then, and I repeat now that that study was seriously flawed. If you take any market and put into it a DISPROPORTIONATE number of new homes you will SKEW THE MARKET UPWARD. New homes have lots of bells and whistles that existing homes don't have: Granite countertops, TWO walk in closets in the master, whirlpool bathtubs, multi-headed showers, higher end appliances-convection ovens etc, higher SEER A/C units, etc, etc.

Some of these things cannot be "economically" added to existing housing stock. The actual appreciation of EXISTING homes in SA has been much closer to 2 1/2%-3% than the big numbers posted in that magazine article.

Sorry about your problems. I hope some others will read this thread and decide that maybe the "gurus" aren't always right.

Dealmaker