Legal Question in Bankruptcy in California

Re: Notice of Default, Modification, & Bankruptcy

First, let me caution you against an emergency Chapter 7 to stop the foreclosure. While its pretty clear that you are going to file for proper reasons - to discharge potential liability from the home and other debt - be very careful about using bankruptcy solely to delay a creditor such as the bank. Technically, that can be considered an abusive filing and could result in dismissal, denial of a discharge, etc... I'm not saying you cannot do it, just be careful. Additionally, "emergency" bankruptcy filings cost more, and are risky - you risk having your case dismissed if you cannot get everything filed within 14 days of filing the petition.

Second, I think your plan is a good one, and agree with Attorney Whitaker. Make the third payment, and lock in your loan modification. What that will hopefully do (and you need to carefully read the loan modification to determine this) is capitalize the other past-due amounts - meaning add it to the loan balance. At that point, you should no longer be in default and they start the process all over again. I would be more than happy to review the loan modification agreement with you, and begin planning for the bankruptcy filing. After reviewing documents, it will be much easier to answer your question as to timing.

One additional consideration in terms of filing the bankruptcy - you need to review with someone your means testing. Since you are going to stop making payments on the home, but will not yet be paying rent, you are limited to the IRS standardized expenses to reduce your monthly income (unless you are below median for your county). It would be very wise to sit with an attorney in the near future to go over this whole situation and route-out a course of action.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.

Re: Notice of Default, Modification, & Bankruptcy

Make the 3rd payment to lock in your loan mod, and then file Chapter 7 to discharge all your unsecured debt as well as the second. They will still have a lien on your property, but there would be no reason for them to foreclose since they would receive nothing.