any advice?

[c24]

Thanks in advance for any advice.... I have a house mortgage of 675k. The current mkt value of the house is under 400k. I made a huge mistake buying this house and I can't afford to continue, have no savings and have 50k in credit card debt. I am trying to do a short sale but have no offers and the bank isn't likely to take that much of a hit. If I am left with no choice but to foreclose, woul a Ch 13 protect me against a deficiency judgement or would I have to pay back the deficiency judgement on the difference between what the bank can get for the house at auction and what I owe? Thanks for any advice and insight.

[justbroke]

Depending on where you live, a deficiency judgment may be impossible for the Bank to get (like in California on a Purchase-Money first mortgage).

For the Chapter 13, it would depend on your disposable income, your income (whether you're below/above median), and the length of your plan!

Example, say your disposable monthly income comes out to $500/month and you're a below median income person for your state. First, that makes you a 36 month plan. Second, you would pay $500/month for 36 months.

The deficiency balance would be treated as unsecured. So, they would get a percentage of the $500/month for 36 months, along with your other $50K in debt. Say the deficiency balance is indeed $200K.

So, since your payments to unsecured would be $18K (36 x $500), the deficiency would have 75% of 18K paid towards it or $13,500. That's right... in this scenario, you'd end up paying $13,500 for the deficiency and the rest discharged. The other credit cards (the $50K), would receive the other $4,500 of the distribution and discharged as well.

Hope that helps.

[c24]

Thanks so much. The house is in NJ. I make about 150k and could live in a cheap rental (I plan to do everything different in my new life I would have a large disposable income if I foreclosed on the house, does this mean that I would have to pay all of that toward the possible $275k deficiency over the next five years?

[justbroke]

Thanks so much. The house is in NJ. I make about 150k and could live in a cheap rental (I plan to do everything different in my new life I would have a large disposable income if I foreclosed on the house, does this mean that I would have to pay all of that toward the possible $275k deficiency over the next five years?

Yep. That's what it means!

We're in the same income area, and when I did my Plan as just living in a cheap apartment (as a single person), I would have paid back 100% on $330K of unsecured debt!!!

Let's talk about this house... maybe we can help you! Do you have two mortgages on it, or just one? If you have two, what's the value of the first mortgage? Has it been appraised recently, or is that value just your guess?

I ask, because I was going to give up my house, only to learn that I could shed $130K worth of second mortgage and only pay the first mortgage. Also, the value of my first mortgage and the value of the property are about 5% off, so I can swallow that easily.

Adding that Deficiencies are allowed in New Jersey. However, there are protections where the Bank has to credit you "Fair Market Value" no matter what it sells for. However, if it's a Judicial Sale, then they can't claim a deficiency. They can only claim deficiency on exercising a Power of Sale clause in the Note/Mortgage. You should check to see if your mortgage has a Power of Sale clause.

[c24]

That's what I was afraid of. The first mortgage is 600k, the second is 75k. They are both from the same lender and were taken out together to purchase the house. (I put 75k down on a purchase price of $750k).

I had a real estate agent walk through the house for an opinion and he gave me 400k. There are many houses for sale on the same street but aren't moving. The property is on the water in a flood zone and has been flooded several times.

I was hoping to get the new fha "Hope for Homeowners" Loan whereby the principal would be reduced to the market vale and any upside on the equity would be shared with the government. I can't find any lenders participating in the plan, it's roll out could take a looong time or not happen at all.

I sincerely appreciate your insight - thank you thank you, thank you.