Buy Or Rent

[DayOne]

HI

I am on the edge of BK and am wanting to know if it is better to buy right now before is all falls apart or if I should rent and wait it out.

I am trying to get the kids in a certain school system. The move is inevitable so I am wanting to make sure I make the right choice.

I talked to my mortgage guy yesterday and because of my deteriorating credit, I would have to put 10% down and pay 3 points.

It is a townhome and it is pretty small and at the top of our budget so this is probably not something we could stay in long term. ( more than 3 years )

The 10% would probably be a mixture of 401k loans and CC cash advances. How bad is that?

Thanks Much

D.O.

[willingtocope]

Depends on how far off the BK is. CC cash advances to make the down payment would certainly put the mortgage at risk.

IMHO, renting is a better option. (For one thing, an early 401k withdrawl will cost you taxes...even a loan against it would get messy in a BK).

[thomassl]

In your case, I definitely would rent!

[bingo]

Rent.

401K, are exempt from creditor seizure and large cc advances on cc's followed by a bk filing invite an objection.

Don't file bk and be left holding a subprime mortgage. All in all, a very bad plan.

[DayOne]

Rent.

401K, are exempt from creditor seizure and large cc advances on cc's followed by a bk filing invite an objection.

Don't file bk and be left holding a subprime mortgage. All in all, a very bad plan.

Ahh, that is the kind of input I needed. Thanks.

I am not sure how far off the BK is but it feels close. I have yet to talk to an attorney but I need to soon. I have been borrowing from the 401k now for awhile to try and turn things around but it is just not going to happen.

What about taking some of that cash advance to pay back my 401k? Probably still bad?

I have a CC in my business name that does not show on my personal credit that I was thinking of pulling from. Obviously I will run this by an attorney.

Is there anyway to get back some of the money that I have been using to stay afloat?

Thanks again.

[DayOne]

There is one owner in the area I am looking at that is pretty motivated and I might be able to talk him into owner financing me with little money down.

Is this still bad?

Thanks

[willingtocope]

Yes...still bad.

And...is the business incorporated? Is the CC in the business name without your personal gurantee? Either way, using it within 6 months of the BK may get you in a whole of hurt...

[DayOne]

It was incorporated but has since been dissolved. To be honest I am not sure if I personally guaranteed it. I do know it does not show on my credit.

Do I call them to find that out?

I am sure that is not a red flag for them.... haha

thanks again.

[willingtocope]

If the business was dissolved, the card should not be used. If you do use it, then later file BK, you're opening yourself up to fraud charges.

In fact, if you use any of your cards within six months of filing, you may have some creditors show up at your BK meeting...

[2ndTimeAround]

D.O.

Whatever you do - do not do bankruptcy. You think you have problems now, a B/R will put you deeper in the hole. It looks like an easy way out, you'll pay for it bigtime later!!!!

It you go to speak with a bankruptcy attorney - face it they do not care about you. They will talk you into it because thats how they make their money. Did I say do not do bankrutcy!

My advice on your purchase, paying 3pts (to much) with your other closing costs. You will not recoup that back within three years. By renting you will not be paying mortgage tax, so you payment can be lower.

As for taking advances from you 401K - you have 60 days to borrower and put that back. Or pay penalites and higher taxes. Do that as a last resort.

If you have the 10% in the bank now, pay your bills, work on getting and keeping your credit up for the next three years. One of the advantages to having good credit, it gives you choices to get the best loan/payment. By renting, you would be giving ourself a break...... Did I say - do not do bankrutcy!!!

My $00.0002 - good luck.......

..

[willingtocope]

Hmmmm....so I'm just assuming your business went in the toilet, and you had invested a lot of CC debt in getting it started, and now you're looking for work, and a place to live.

BK may be the only way out...

Yep, you're credit will be trashed, but....

[DayOne]

To 2ndTimeAround

Whatever you do - do not do bankruptcy. You think you have problems now, a B/R will put you deeper in the hole.

OK, why is that? I am not understanding something.

It you go to speak with a bankruptcy attorney - face it they do not care about you.

That is why I have yet gone to talk to anyone. I don't think I can get a truly un biased opinion on what my situation is.

My advice on your purchase, paying 3pts (to much) with your other closing costs. You will not recoup that back within three years.

I agree. That is a total sucker loan that cannot be recouped unless I live there a very long time.

As for taking advances from you 401K - you have 60 days to borrower and put that back. Or pay penalites and higher taxes. Do that as a last resort.

When you say advance, is that the same as a loan? My loans are setup to be paid back over a long period of time.

If you have the 10% in the bank now, pay your bills, work on getting and keeping your credit up for the next three years. One of the advantages to having good credit....

I am 40, have owned a few houses up until recently, have had a 720 my whole life until the events of the last few years. If I could keep up my credit for three years and make payments, I wouldn't be on this board. No offense intended.

Did I say - do not do bankrutcy!!!

Please explain.

Thanks again.

[DayOne]

Hmmmm....so I'm just assuming your business went in the toilet

Yes. 2 actually.

and you had invested a lot of CC debt in getting it started

Big yes.

and now you're looking for work, and a place to live.

I have actually had the same day job for 12 years so I am lucky in that regard. These were both home based businesses. One for my wife and one for me. We tried to make something hapen to make ends meet and it has completely backfired.

We need to move as our current landlord is selling and we need to be in a better school district.

My landlord is selling the SFH that we rent for $675k so it is tiny bit out of our range.

Thanks again.

[jq26]

BK is not that bad. I did one in October 2004 and had roughly 700 FICO scores 2 years later. The worst part of the BK7 was the severe mental anquish the year prior to it that I put myself through. Fortunately, I can look back and laugh.

Regarding BK attorneys- they are all different. My guy could have cared less about me and was a moron who must have cheated his way through law school. The case almost got dismissed twice because he forgot to send in papers and pay my filing fees. But you get what you pay for. My attorney was $600 INCLUDING filing fees.

[DayOne]

Thanks JQ. Funny how you feel when you cross that mental hurdle.

I am actually looking forward to it now compared to what the last year has been as you said.

I am still as little concerned as to the comments made by 2ndTimeAround and why he thinks I will be in such a bad spot if I do a BK.

When finding an attorney, I guess I should ask for referrals and call them? I thought I would start with my towns chamber of commerce and see if they had any leads.

Thanks again

[bingo]

Nobody has any business making a blanket statement that you should or should not file without knowing all the facts.

We're just answering your questions. Post your income and amount of debt and we may really be able to help.

I'd have 2 thoughts. If the majority of the debt is business related, you are exempt from means testing. Also, leave the 401K alone. You can't borrow your way out of debt.

I filed on $71K worth of cc debt in Oct. of 05 and life couldn't be better.

[willingtocope]

If the majority of the debt is business related, you are exempt from means testing.

I'm not disagreeing, just curious. Can you expand on this a bit? When we filed in 2004 (before the law changed), the means test wasn't part of the law....

[bingo]

Here y go Willingtocope: This is a copy and paste from another site where a former business owner explained it pretty clearly.

The BK petition form has a box titled "Nature of Debts" with two different options. - Debts are primarily consumer debts, defined in 11 U.S.C. SS 101.8 as "incurred by an individual primarily for a personal, family, or household purpose" OR Debts are primarily business debts.

Form B22A (the means test calculation used by persons filing Chapter 7) carries this statement immediately under the heading: "In addition to Schedule I and J, this statement must be completed by every individual Chapter 7 debtor, whether or not filing jointly, whose debts are primarily consumer debts. Joint debtors may complete one statement only."

It appears to be derived from SS 707b, the part of the BK code that defines the means testing, which states in part:

(1) After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor's consent, convert such a case to a case under chapter 11 or 13 of this title, if it finds that the granting of relief would be an abuse of the provisions of this chapter.

The bottom line is that if 50% or more of the debt you wish to discharge resulted from operating a business, you are not required to do the means test, and can file Chapter 7 as an individual.

[DayOne]

here are my specs:

Myself, wife, 2 young ones.

My W2 income: 85k/yr

Wifes S-Corp: -15k / yr (possibly more)

Debt Origination:

My Side Biz: 12k

My Personal: 10k

Wifes S Corp: 45k

Wifes Personal: 24k

Obviously there are some issues here.

In the last 6 months we tried moving debt around to get our high interest rates manageable. You can probably deduce how that worked out for us.

My biz CC's are currently empty - on my personal cards.

I would say probably 35k of my wifes biz debt is also on my CC.

As an aside, we have abandoned buying (thanks for the advice) and found a rental for $1300 in the same complex that were looking at. We are seeing it tonight so hopefully we can lock that up and finish that little piece of the puzzle.

Out of curiousity, if I did have to do Chap. 13 - in some strange way wouldn't it be better for me to have higher monthly rent/mortgage payments so I am not having any left over to pay back in monthly installments? Obviously would like to start saving again with our expenses lowered but having to pay back a high monthly amount could damper that, couldn't it?

Thanks again