The effect of Bankrupcty cancellation

[cityguy468]

What is the name of your state? I live in New York.

I've filed for a Chapter 7 a few weeks ago. However, since then, circumstances
have changed such that I may be able to get a home equity loan to pay off my debts...all credit card debts. I was out of work for several years, but have since regained employment and have a steady income. We have not yet done the 341 hearing.

If I cancel or "annull" the bankrupcty, what is the true effect of having originally filed it?

If I get the home equity loan, pay off the cards and start making the payments, do I go back to my pre-filing status, which other than having high balances on several cards...was not bad....a long history of paying off loans, making card payments on time, and until I filed, no payments were late.

Will I be able to retain a few cards, ect? And what will this do to my credit rating in the short term?

I read somewhere that it stays on your history as a bankruptcy annullment or cancellation?

What is the true effect of that when trying to get loans or keep cards?

[bigun]

It'll stay on your credit reports for 10 years as a dismissed bk.
Have you not yet learned it is impossible to borrow your way out of debt? Why on earth would you make unsecured debt secured by your home? What happens should you lose your job again-you will have placed your house on the line. Forget the HELOC and go forward with the filing.

[cityguy468]

Here are some of the variables I did not mention in the original post....

I initiated a Chapter 7 with the understanding from my attorney that it would fly.
I told him I rent and the only futures interests I have was a living trust on my mothers home (fully paid off) which would not become accessible to me in anyway until she passed.

However, it turns out my mother mis-informed me and what she initiated was actually
a life estate, more than 5 years have passed, and the house IS in my name now.

I need to keep the house from being in danger of being sold. I can think of only two ways to accomplish this. In both scenarios I move home so I'm not paying rent on an apartment and instead am paying off either the amount of unsecured debt on my cards under a chapter 13 (converted from Chapter 7), in which case I show I did file a bankrupcty and it's there for 10 years, or I take a home equity loan out instead, paying off my debts + the interest for the loan, but I didn't actually go through with the bankrupcty.

I have to live in that house for 5 years regardless in order to pay off either the Chapter 13 payments or a home equity loan, so in that respect, I suppose the house will be endangered by another possibly employment loss in either event.

The real question I was trying to get the answer to is... which is worse....Chapter 13
and paying off the debt that way over 5 years, or annulling the bankrupcty, which you say will be on my record anyway, but paying off the debt with a home equity loan, which will also show on my record that I payed off a debt, I'm guessing ulitmately improving my credit eventually.

It seems to me that what I'm try to get an answer to is which way will I ultimately be better off...just converting to Chapter 13 and paying the debt, or annulling the bankrupcty, paying additional interest, and just having the fact that I once filed and cancelled a bankruptcy on my credit.

I'm trying to guage how bad the annulled bankrupcty will hurt me on my credit record as opposed to going ahead with Chapter 13.

[bigun]

You need to speak with your attorney. If the trustee finds signficant assets, they may not dismiss the filing. How much equity in the home? NY exempts $50K. What percent payback would a Chapter 13 plan call for?

[cityguy468]

The house is completely paid off, and worth in the area of $300,000. I owe about 87,000 in credit card debts. I'm pretty sure they're going to make me pay off the entire amount.

So it comes down to whether I just go ahead with 13 and pay it off over 5 years, or
cancel and do a home equity loan instead for the full amount, pay off the cards, and pay the loan off over 5 years, so that I'm not actually going through bankrupcty.

So the question was assuming I have the option of paying in either of the two methods,
would cancelling the bankrupcy and doing a home equity loan instead be better for my
credit restoration in the short and long term.

[moburkes]

The BK will be on your credit report either way. However, if you borrow from your home to pay unsecured bills, and lose your job, or become disabled, you will then lose your house. If you file BK, and one of the above situations occurs, then you may be able to make smaller payments OR convert your BK to a 7.

[cityguy468]

Ah, OK. Now that's information I did not have and had not considered. From that perspective, it certainly seems like going ahead with the BK is the best methodology.

Thanks to all for the feedback.

[bigun]

Another advantage to a 13 is, unsecured is repaid at a 0% interest rate.
Plus, creditors have a specific timeframe to file a proof of claim. Not unusual to some fudge up and not file a timely proof of claim. In that case, they don't get paid and the debt is discharged.

[cityguy468]

Big Gun, I was not aware of that either. Thanks all for the input. I truly appreciate it.

[Ladynred]

IMO, convert to a Ch 13. As Bigun mentioned, it's possible not all creditors will file a proof of claim and depending on your disposable income, you may only have to pay back 1% or 2% of that 87K of unsecured debt over 5 years.

As it is now, you stand to lose the house in a Ch 7 as you cannot claim it as a homestead if it is not your primary residence.