Giving up our house in chapter 13

[sunshine09]

I will make this very brief. We have been trying to sell our house off & on for 5 years, but the value has plummeted. Tried a short sale too. Our last resort to getting out of this house & moving south was filing a chapter 13, our first court date is in two weeks.

I have googled like crazy, but can't find info on what it does to your credit report, etc when you include your home on the bankruptcy. Everything I found was about saving your house! We are not saving it obviously...we are finally getting rid of it!!

Is our home going to be considered a foreclosure? Any info would be greatly appreciated wrt chapter 13 & including your home.

[lrprn]

Since you are giving up your house through the Ch 13, it's considered surrendered. The surrender hit is hidden inside the considerable Ch 13 hit. It would hurt your score more to have the house in foreclosure before filing - that gives your credit score a double hit.

Please excuse my bluntness, but truly this isn't the time to be worrying about your credit score. Ch 13 filers are more fortunate than Ch 7 filers in this respect, because we pay back at least a portion of the debt, and we have 3-5 years of on-time payments to secured and priority debts to help us when we finally emerge from Ch 13. Most Ch 13 filers can get decent credit fairly soon after they are discharged.

Now please stop worrying about your credit score and focus on building a realistic family budget to get you through the Ch 13. That's a huge priority. Faithfully sticking to a realistic budget is the most important thing that influences whether you make it out of Ch 13 successfully or not.

[sunshine09]

Thanks. So, it's not listed as a forclousure on your credit report? We are not paying our mortgage now that the bk is filed, except the small amount given to them by the trustee per month.

Not that I'm worried, just wanting to understand how it works. I can't find anything online about when you give up your house with a chapter 13.

[lrprn]

Thanks. So, it's not listed as a forclousure on your credit report?

After you file, your lender will request that the automatic stay be lifted so they can repossess the house. Hopefully one of our Ch 13 members who also surrendered their house can share if the repossession shows as 'foreclosed' or 'surrendered' or just shows IIB (included in bankruptcy) just like all the other discharged debts on their credit report.

However, no matter what your credit report states about the house, understand that filing Ch 13 even if you kept the house is going to send your credit score into the toilet for quite a while. Since you can't take on new debt during your active Ch 13 without your trustee's prior permission means that it doesn't matter what your credit score is. You have to learn to live within what income you have coming in every month, because you can't use credit any longer to make up the difference.

[sunshine09]

Thanks again! That helps a lot! We won't be doing anymore credit cards, even though we only had a couple. Most of our debt was from medical bills, & of course the house.

I just hope the mortgage company doesn't give us trouble. That's an other area I would like to look into...if the mortgage company & our second mortgage (used for medical purposes) can come after us. They won't be paid in full in the 3 year plan. The BK lawyer said they basically just eat the difference...but it still makes me nervous!

I really appreciate your feedback!

[EricaCallaha]

They don't have a choice but to "eat" the difference. They have the house. They can sell it. You are paying back according to your plan. They cannot come after you. It is the law.

Take a deep breath. Bankruptcy is nerve racking. Accept it and put faith into your attorney.

Good Luck!

[sunshine09]

It certainly is nerve racking. One lawyer did say that the banks will go after people who foreclosed eventually...but right now they are too swamped. I know I've heard it somewhere else too...that's why we went the bankruptcy route.

Our first court date is next week. I hope I won't be too anxious, that hubby & I can answer the questions right. EEK.

[EricaCallaha]

I don't see how they can go after you if you included it in your bankruptcy petition. Plus they have the property that secured the loans. Plus, banks want to get rid of your house fast. They are not in the real estate market. They do not want houses. They want money.

Just remember to answer yes or no to all the questions asked and speak loud and clear. They record the session and will instruct you to that regard. It is not nearly as scary as we will make it in our minds. Ours went very smooth. We are slated to be confirmed any day now. Take a breath. It is what it is. As long as you were truthful on your petitions, everything will turn out fine in the end.

Best of luck!!

[elster]

Well I filed CH13 and moved out, tried to surrender house in full satisfaction. My state allows the lender to pursue a deficiency judgment, and the lender is objecting to my handing over the house in "full satisfaction".

I am not sure where this is going, but I hope to not list my lender as unsecured for the amount of the deficiency. My house is so underwater, I'd be paying about 1-2% back. It's kind of bizarre to me they are pursuing me for such a small amount and they are losing almost half a million (yes, the deficiency is that huge).

I sure hope you're having better luck than I am.

[sunshine09]

Wow Elster...I hope it works out for you.

We got a letter of objection from the mortgage co saying to reword the plan since it was not being payed "satisfactory". It sent me into a panic, & hubby called the lawyer. He said we will be getting a lot of those kinds of letters, & don't worry about it. Yea, right!


Thanks everyone for their input!!

[EricaCallaha]

For once....the hubby is right. You have come this far. Take a breath and it will work out. We got some nasty letters right before our filing and my husband freaked. But they are just trying to scare you to make you rethink your bk. If you have come this far...follow through. It will work out in the end.

Good luck!