[spalione]

We are currently in a short sale process of our home of 11 years. We are upside down about $250,000 and owe $225,000 on our 2nd mortgage. We lost $30,000/year of our income and could no longer continue to pay the full mortgage. We tried for 18 months to get a loan modification but our first denied us 4 times. Our second did modify our loan within 3 months of applying. This was only a $500/mo adjustment, though appreciated, not good enough to help us keep up with the first mortgage. We listed our house to sell and sold it within 2 weeks. We are currently in escrow and have just learned about Chapter 13 bankruptcy. We only have 3 weeks to act before escrow closes, so pleaseeee someone help us decide. Should we file Chap. 13 and discharge our debts plus our 2nd mortgage, making it possible for us to keep our home? This will impact our credit for 7 years. Or should we follow through with the short sale and rent for 2 years until we can buy again? What is the better way to go? We will also try to modify our first again since our debt ratio will be much better and our first is still quite steep. ($4400/mo) The reason BofA said they denied us was our debt ratio was too high. HELP

[Fr_Chuck]

Chapter 13 does not "discharge" debts, it does set up a payment plan, if possible to pay non secured debts off at a much lower amount. I would say perhaps a chapter 7 may be more in line with what you want.

But at this point, you have a contract and a legal obigation to the buyer.