Private Mortgage...

[imoverit]

We are planning to file more than likely chapter 13 and walk away from our house. We owe 295k (225k on 1st and 70k on 2nd) and we might be able to sell for 175k. A short sale is pretty much out of the question as we have 1st, 2nd, and pmi. I live in Florida. We have the opportunity to buy another property using owner financing. We haven't missed payments yet, but this is the month it has all caught up to me and I can't make them all. If we buy another house using owner financing and in a few months file chapter 13 what will the ramifications be? Obviously surrender the old house, but will we be able to keep the other and keep it outside the plan and not get into any "legal" trouble. I mean, we do need somewhere to live and the new house will save us $1700 a month in payments!

[justbroke]

No legal trouble at all, as all liens survive Bankruptcy (without some specific action). That is to say that your purchase of the new home under a contract for deed (or other similar installment sales contract) will still be enforceable. The seller would have recorded a lien and/or held some interest through a third party.

This is nothing special. It's not frowned upon. As a point of fact, we encourage people to get all of their secured debt purchases out of the way before filing (like a new car).

I'm sure you're putting a cash down payment as part of the transaction. The equity in the property should be covered by any homestead exemption so converting the cash (non-exempt more than likely) into an exempt asset (homestead) is worth it, to me.

Now, depending on what District you file in, will determine whether they'll allow you to pay it outside of the Plan. In many Districts, your attorney would need to file a motion to allow payments outside the plan, in order to do this. Just know that it is possible to make those outside payments. However, you do have to disclose the "payments" made on that property. You can't hide that.

[imoverit]

thanks for the reply! I have another question... Will the trustee allow to me x$$ to put aside for taxes and insurance as it will not be escrowed? This deal seems to good to be true, I am looking for the negative. Also, will the lienholders be notified of our bankruptcy if we pay it outside of the plan?

TIA

[justbroke]

thanks for the reply! I have another question... Will the trustee allow to me x$$ to put aside for taxes and insurance as it will not be escrowed? This deal seems to good to be true, I am looking for the negative. Also, will the lienholders be notified of our bankruptcy if we pay it outside of the plan?

TIA

I'll answer the second question first. You are required to list all debt which is secured by a residence or other property (like cars, motor homes, land, etc). There are rights that need to be conveyed to these lienholders, hence you need to notify them of the Bankruptcy. I know, you don't want the new seller to know, but they must be notified. The thing is, there's nothing they can do about it. They have to abide by the rules and Automatic Stay procedures of the Bankruptcy. It's to protect you, mostly, from them doing bad things.

Say, for example, you didn't let your Seller know. He finds out some other way, and then seeks to somehow void the sales agreement (by you missing just one payment). He can then argue that he never knew you were in Bankruptcy (when you go to assert that as a defense), and then it would get interesting.

Your Chapter 13 Payment Plan would include taxes and insurances for the home! You can pay that through the plan with the mortgage, or, if you're allowed to, pay outside the plan.