Wanting to let the house go away after all

[iha]

The husband and I filed Chapter 13 on 9/28/09. We have paid in 6 months already for the repayment plan and it is taken out in payroll deductions. We were going to let the house go because we have a mortgage of 309k and the house is probably worth around 225-250k. So we figure we will never recover enough to ever be able to save it. The payments are $2300 a month. We decided to keep the house after all (pride or short-sightedness??) and we were about 23k in arrears. Our plan has now been confirmed as of 2/12/10 and the arrears are listed on the 13datacenter website as secured debt. We haven't signed re-affirmation on this or anything. We already have past tax debt to pay off in the repayment plan and just found out that we owe a total of around 7k for state and federal taxes again this year.
We have now decided the only way to get a fresh start is to unburden ourselves of this mountainous mortgage. We need to get the 2009 tax bill paid or added into our repayment plan, save money to move out of here, and be able to breathe! We realize our repayment plan is going to go up by about $1000 a month (it's already at $1500) but we figure after 5 years, we will be fine.
My questions are these, what happens if we just don't send in the March mortgage payment? How soon do we need to notify the trustee that we aren't wanting to keep the house? I know they will modify the plan to account for the extra DMI if we aren't paying mortgage or rent yet but will they let us save some for moving? And if they won't let us add the 2009 taxes due into the repayment plan, do they have to let us take money to pay it out of the plan? If we let the house go, I would assume that we are going to be at about 100% repayment on our debts except for the mortgage of course. BTW... we do have mortgage insurance.
Will someone try to come after us for letting the house go after the plan has been confirmed? Jeez! How stressful! We just feel buried! I think we were thinking emotionally when we wanted to keep the house but even though we make good money, if we keep it we need to stay married to a $2300 a month mortgage payment for 30 years. It didn't seem so bad when we bought it in 2005 and thought the value would just keep rising instead of tanking.
We are hoping to have a meeting with our lawyer next week to decide what can happen for us but I'm very stressed out about this.
Thanks for your help!

[Flamingo]

Since you are confirmed, missing mortgage payments will line you up for a dismissal. What you need to do before you do anything else is contact your attorney. Best of luck to you.

[iha]

We don't want to get a dismissal after paying 6 months in to the plan for sure. We won't not send the mortgage without talking to our lawyer next week. Any idea what the trustee will do in a situation like this if we can end up being a 100% (or very close to it) repay plan except for the mortgage? I mean, are you allowed to do this? What if they dismiss our case? How long would it be before we can refile? Oh good lord! 6 months of payments gone and paying more attorney costs and filing fees! Should it just be a matter of filing a modification? Also, any ideas on the taxes that we owe for 2009? Man this is just overwhelming!

[lrprn]

Are you trying to keep other assets that you would lose if you filed Ch 7? Is it possible that you could qualify to file Ch 7?

If you can't qualify for a 7, then amending your plan is your best bet.

Keep in mind that if you surrender your home and move into a rental, then whatever the difference is between your rent and your former house payment is likely to be considered new disposable income by your trustee. How does rent in your area compare to your house payment?

Unless your living expenses have also increased enough to reduce your new disposable income amount, then it's likely your monthly payment will go up.

You need to sit down with your lawyer to figure out all the angles and which is going to give you the best long-term results. Call and make that appointment today.

[newbie2]

If you really want to let go of your house, do it soon. We are in the same position now, and are too late to amend our plan to include any deficiency balance arising from our home. (We are 4 years in to our plan) Absolutely talk it over with your attorney soon, and do what is best in the long term for you and your family.

[iha]

We have an appointment on Thursday to sit down with our attorney. To be honest, he's not been any help as far as giving any advise for anything. We've sort of been on our own.
We make too much money to file Chapter 7.
The allowable amount of rent we can claim is $1212 or something like that and our payment on the house is about $2300. Sounds awful but rent around here is more than the allowed amount and we will just have to see what we can find.
We are counting on our repayment amount going up around $1000 more but realistically, we need to put away at least $300 more for taxes each year especially without the house interest write off. So maybe it will only go up by $600 or $700! LOL
Our main concern is that we can just let the house go at this point and get the 7k in 2009 taxes paid. Oh, and of course, have money to move out and be able to find someone willing to rent to us!

[bkstuff]

How many people are in your home? That rent $ does seem low.

[iha]

bkstuff- It's just the 2 of us and 2 little dogs. Kids all grown and gone.

[espo1357]

seems like you should just let the house go, and lower the payments.
your attorney is not there to give you advice, really. they just want your money for the work to do the 13 or 7.

besides, you can live rent free for 6 to 24 months!

[manyquestion]

Would trustee want the extra money while the house is being foreclosed and living rent free?

[Flamingo]

seems like you should just let the house go, and lower the payments.
your attorney is not there to give you advice, really. they just want your money for the work to do the 13 or 7.

besides, you can live rent free for 6 to 24 months!

The OP is in a confirmed Chapter 13 and missing payments of any sort during the Plan will result in a dismissal. This is not something to fool around with or give advice like the above. A dismissal at any point during a 13 is bad as it puts the filer right back at step one before filing. The OP needs to review the entire financial situation with their attorney who knows it best to ensure the best outcome.

[BnkrptcyLwyr]

Unfortunately, your case should be dismissed and you should refile (you'll probably have to file as a 13 as it sounds like you have the income to do so).

The reason you have to re-file (at least here in the Sixth Circuit you would have to, and I'll bet the same is true in all other circuits) is because having made the decision to keep the house, and having made it to confirmation, you are now "bound" by the plan and the treatment as to the secured lender. Meaning that you can't just "surrender" the house now. 11 U.S.C. 1327 states that the debtor and creditors are bound to the terms of the confirmed plan. You can't modify your plan afterwards to let the house go. 11 U.S.C. 1329 (the section dealing with modifications of plans) does not allow for changing the treatment of creditors.

Having said that, there can be a disconnect between what you legally can do, and what is practically done. I have surrendered secured collateral post-confirmation. The reason that the secured creditor didn't object is because they knew darn well I could get the case dismissed, refile, and then just surrender in a new case, so they figured why go through all of that, and just consented to the surrender.

But, not every creditor will consent like that.

The best thing to do is suck it up, dismiss the case, refile, and properly surrender the house. And this time, make all the right decisions. Too often people succumb to pride ... and end up making really costly decisions. This is one of those times, and you're not the only ones. I don't know how many times I wanted to tell a client "I told you so" ... luckily, I don't have to, because they usually admit "B____, you were right."

[iha]

Thank you so much for the reply!
So is this true even though the only secured part in the plan is the arrears that we owed at the time of filing? We pay the mortgage payment on our own, outside the plan. We have never reaffirmed the mortgage debt to BOA.
Thanks again.

[BnkrptcyLwyr]

Thank you so much for the reply!
So is this true even though the only secured part in the plan is the arrears that we owed at the time of filing? We pay the mortgage payment on our own, outside the plan. We have never reaffirmed the mortgage debt to BOA.
Thanks again.

The arrears is not the only secured part.

For bankruptcy purposes, a creditor in a Chapter 13 is "secured" up to the value of the house, and unsecured on the rest.

Out of bankruptcy, we think of a creditor as being "secured" strictly by virtue of the mortgage lien.

The fact of secured or unsecured status has no effect in this case on any first mortgage and an attempt to surrender. You are trying to change the treatment of the claim post-confirmation ... which you cannot do. Best bet, as I've said, is to suck it up, dismiss, and re-file later.

Note, you may have to wait 180 days to refile if you ask for the voluntary dismissal, and there was any request for relief from the automatic stay. See 11 U.S.C. 109(g)(2). Note again, this 180-day bar does not apply if the dismissal was not voluntary (e.g. - the Trustee requests dismissal and the motion is granted).

[sofarsogood2]

My understanding was if you don't reaffirm and are paying outside the BK, you are not bound to that payment. When I first read your post, it sounded like you had reaffirmed.

My attny. (Fl) said we are personally free from the debt now (discharged) but if we want to stay we just protect the lein by paying the payments, taxes and insurance. When we decide to leave, we can notify them, pack up and go.

If the $ is going to come out of your pocket either way, why not just stay put? I not sure, though how to deal with the tax issue- but I would think that debt could be added to your plan, thereby causing the unsecured creditors to lose some of their payback, as your already paying the max. DMI. Uncle Sam gets paid first .

If I had to spend the $2300 anyway, I would use it to keep my family comfortable in my current home rather than giving it to creditors. JMO.