4 years done, and now want to surrender home

[newbie2]

Hello everyone,

We are 4 years in to our Chapter 13 plan and during the last 4 years our home value has plummeted so drastically that it no longer makes financial sense to keep it. (60% underwater) Even though it would be hard emotionally to leave, we both know that it is best for us in the future. (Less than 10 years to retirement, hopefully.)

Does anyone have an idea of what the process would be like to amend our plan for the remaining 12 months? Our mortgage payment (and 2nd mortgage) is paid by the trustee.

Any help, advice, or "been there, done that" would be much appreciated. BTW, we are in Michigan.

[BKDefender]

You could convert to chapter 7 and surrender your home. That depends on whether you have other reasons for a chapter 13 to continue (too much income, IRS debt being paid off, etc). If you don't have any other reason to be in Chapter 13 except the home, then Chapter 7 would shorten everything and let you give up the house and go on your way.

--William

[newbie2]

Bkdefender, thank you for your response.

We cannot convert to a Chapter 7 because we are over the median, and have disposable monthly income. (No IRS debt thank goodness, only secured debt is the house. Because of the decline in property values, the 2nd will now become unsecured I would imagine.)

Is the process to amend the 13 plan to surrender the house semi-painless or will it be as if we are starting over?

[BKDefender]

Your BK attorney would need to amend the plan. The problem though is you'll have to go through the process of getting the trustee's approval for moving expenses and any deposits from your excess income now that you will stop paying the mortgage. The trustee gets a benefit of 10% of a much higher payment unless your new apartment or rental house costs the same as your home mortgage.

--William

[newbie2]

The difference between our area allowable rent and our current mortgage payments is about $325. I'm sure the trustee will want that for the unsecureds, and that's ok with us. Completing the Chapter 13 and being better off financially is what the goal is now.

Does amending our plan and surrendering the house mean that the bank can kick us out immediately? Or do they still have to go through the foreclosure process? If we are able to stay while the formal foreclosure process goes on, we can save the money that is allowed to us for rent until there is enough saved to move. (3 to 4 months..?)

Note: Our home was not in foreclosure when we started the plan.