3-yr Arm Loan / Chapter 13

[Mark80]

I have a 3 - yr arm loan on my house, its up in 1 1/2 years. Obviously we all know how stupid it is to be involved in this type of loan. But I don't think I was the only one that got suckered in by a lender.

Anyhow I want to file chapter 13, but I want to save my Car and Home. My credit score is hovering around 590 but its to low and I owe to much (95%) on my house to refinance into a 30-year. Can bankruptcy still be done with a Arm, or do I have to some how by a miracle change into a 30 year before filing so I can keep my home? I would imagine you can't but i'm trying to do the most I can to hold onto things!

Thanks.

[chloe0724]

I have an ARM that expires in Aug. My attorney said that we could use the deed of trust fo figure out what the patment will go up to, but that's only for the first year. Not sure about year 2-5. We are upside down currently and can't refi into a 30 year. I am hoping that the market will rebound and we can eventuly refi or sell.

[HHM]

You can still file BK with an ARM, but as chloe's attorney did, you have to craft your payment plan to account for the readjusted payment when it hits.

[Mark80]

You can still file BK with an ARM, but as chloe's attorney did, you have to craft your payment plan to account for the readjusted payment when it hits.

I was afraid they would redflag you and not allow bankruptcy filing, or at the least force you to not keep your home! This is really good news for us if we decide to file!

Thanks guys!

[parsoc48]

I'm in the same position as Mark and Chloe, with an ARM that's due to reset. I was led to believe several months ago that it would go up by hundreds of dollars, so my attny. asked me to get an estimate from the lender prior to filing . The loan officer then went over how the reset is figured, the index that is used, etc. I didn't understand much of it (surprise, huh!?) but at least I know the name of the index and where to find it. If things stay the same (% rates, prices, etc.) in July/Aug we won't see much of an increase at all...but no guarantees, obviously.
Our original plan (pre BK and pre all this debt!) was to sell the house and get something smaller and less expensive in our same town....we want to go into retirement with a different type of house (fewer stairs, mostly). It won't be impossible within the BK but it won't happen anytime soon. I guess we'll just have to wait and see (big sigh)

[yak411]

I have been dealing with the same situation with the 3 year ARM. It does not reset until next year but I am surrendering my home. There is no way that I am going to sit and worry about whether the payment will increase or the value will so that I can refinance. Sometimes peace of mind is what matters. If you can downsize I say do it..you will feel better. Crazy as this may sound..I feel a lot better since beginning the Chapter 13 and surrendering the house!

[dragonnfly]

If you file you can have your attorney call the mortgage company and have them try to work out a better interest rate or change it to fixed then your reaffirmation can be based on that. My second mortgage is a ARM and is set to adjust in about July of next year, my lawyer didn't even have to call them. The reaffirmation aggrement they sent was a fixed rate with out even asking. I was really happy about that.

[chloe0724]

Dragonfly, are you in a 7 or 13? I was told we don't have to reaffirm in a 13. Lawyer never mentioned anythign about negotiaing the rates.

[parsoc48]

Dragonfly's signature says Ch7
I'm curious too, as we're in a 13

[dragonnfly]

I filed ch 7 but nothing is confirmed yet. The first and third (mine) lawyer I interviewed mentioned about calling and getting rates reduced for reaffirmation. I mentioned it to my second and she didn't say much. My lawyer scheduled me for a hour before my 341 hearing to sign one reaffirmation and to call the second one and try to get the rates fixed. I dont think you have to reaffirm in 7 or 13. (most states) But in a 13 all it would do is up your payment to your creditors, in the long run you would be a lot better off thought especially if you have a dreaded ARM. It sounds odd but the only part that made me nervous is the ARM. I dont care if he get the high interest mortgage reduced at all if he can just get it to fixed. That high mortage is the one of the reasons I was able to file 7 and if it gets reduced too much I will be pushed into a 13. I would rather live with it for about 2 1/2 years and then refinace then live with a ch 13 payment for 5years. At least that is how I have viewed the way it would work. If I am wrong someone please let me know. Dragonnfly

[erinb1975]

We also were suckered into a ARM (big lesson learned there), and it expired last August. In that time our payment has gone from 1550/mo, to 1700/mo, to lastly 1950/month. Keep in mind we also have a second for approx. 350/mo. All this for a 2000sq ft house in central Ohio. We recently made the decision to surrender the house. There is no way I am going to ride this roller coaster for another 5+ years.

Please know that you are not alone in your "stupid choices". Many of us are and have been there. There is not a mortgage crisis for no reason. I think alot of us bought the lines about home appreciation and being able to refinance in 2-3 years out of your ARM. The problem arose with us when we went to refi last August, we found our house suddenly lost about 40,000 dollars in value, putting us upside down. Went from feeling like we were living the dream of homeownership, to feeling like we are prisoners in our own home, unable to sell or refinance. BK has provided us a way out, albeit not an ideal way, but one nonetheless. Chalk it up to a big life lesson, and next time I will do better!!

Good Luck!

[parsoc48]

Any of you have Beneficial/Household Finance? I imagine this (negotiating lower rate or into a fixed rate) varies greatly from lender to lender...and what would be their motivation?
I asked a similiar question on another forum, that I thought lenders would be happy to find a way not to foreclose and keep getting payments; the answer was that a "loss" benefits their corporate bottom line (that was the gist of it, I didn't understand all the particulars)

[dragonnfly]

I have Wells Fargo as a second mortgage they are the one that sent the reaffirmation converting it to a fixed from adjustable. My first is with Lasalle bank (which as of May 5 will become Bank of America) and they haven't sent a reaffirmation yet if they do at all. I am current on the payments with them now. Thats the one my lawyers going to call. Im hoping for the best.

[yak411]

Erinb1975- I could not have said it better myself..We are also surrendering our home. I just moved to a rental this weekend and I am free as a bird!!!

[billybob37]

We also were suckered into a ARM (big lesson learned there), and it expired last August. In that time our payment has gone from 1550/mo, to 1700/mo, to lastly 1950/month. Keep in mind we also have a second for approx. 350/mo. All this for a 2000sq ft house in central Ohio. We recently made the decision to surrender the house. There is no way I am going to ride this roller coaster for another 5+ years.

Please know that you are not alone in your "stupid choices". Many of us are and have been there. There is not a mortgage crisis for no reason. I think alot of us bought the lines about home appreciation and being able to refinance in 2-3 years out of your ARM. The problem arose with us when we went to refi last August, we found our house suddenly lost about 40,000 dollars in value, putting us upside down. Went from feeling like we were living the dream of homeownership, to feeling like we are prisoners in our own home, unable to sell or refinance. BK has provided us a way out, albeit not an ideal way, but one nonetheless. Chalk it up to a big life lesson, and next time I will do better!!

Good Luck!

If they sell the house for less than owed, that will be added in the bk, right? What if it is a large amount?