Not walking away while underwater in a chapter 13 is a mistake, I think...

[espo1357]

So, I am 100k plus underwater at the moment, while in my Chapter 13.

The 13 will be over in about 4 years. At that time, I will still be underwater.

So, I will have a home that is underwater by about 50k, at least. Now what?
What happens if I want to walk from that property? Wouldn't I be responsible for the difference?

My point is that, I think it makes sense to just walk from the property WHILE
I am in the Chapter 13, then to get through the Chapter 13, and then walk.

The only situation that make this a moot point, is if I decided to stay in the home for 15 years plus...

I don't.

So, what do you all think?

[usmccop]

It's your choice, which you have to make. Business sense says walk away if you're that underwater, but you have to weigh everything. If you had the house during the 13 filing, they cannot come after you; however, your monthly payment to the trustee will increase if you have lower rent if you walk from the house.

If you decide to walk away I'd do it before exiting the 13.

[espo1357]

It's your choice, which you have to make. Business sense says walk away if you're that underwater, but you have to weigh everything. If you had the house during the 13 filing, they cannot come after you; however, your monthly payment to the trustee will increase if you have lower rent if you walk from the house.

If you decide to walk away I'd do it before exiting the 13.

thanks for your post.

first, my job is sinking fast in the city I currently live in. So, I am going to relocate when the economy picks up. So, there is no need to stay in the house.

I am going to quit the job if I have to, and then convert to a 7.

If quitting is going to be a "problem", then getting fired shouldn't be too hard.

LOL.

[catleg]

A lot depends on whether you in the 13 because you're above median also.

If you're above median you could surrender the house but still be stuck with he 13.

If you're below median (and therefore just in the 13 because you're saving the house) it's much easier to cut and run.

In theory at least there is no means test for conversion to chapter 7, but if you have enough income to fund a chapter 13 it's likely there'd be an objection.

[espo1357]

A lot depends on whether you in the 13 because you're above median also.

If you're above median you could surrender the house but still be stuck with he 13.

If you're below median (and therefore just in the 13 because you're saving the house) it's much easier to cut and run.

In theory at least there is no means test for conversion to chapter 7, but if you have enough income to fund a chapter 13 it's likely there'd be an objection.

Thanks for the feedback.

We are never really stuck in a 13. There are always options in life.

For example, I could just let go of the 13, and lose court protection.

Afterwards, I could just file a 7 when I lose my job or get fired or make less money.

Originally, I did the 13 to save the home. It was worth 100k MORE than it is now, in less than a year. That is really bad luck, isn't it?

Now that the housing market has really gone to crap, and my job stinks, and I want to move, the play has to be leaving the home.

The "problem" is just figuring out the best way to get "bang for the buck" in this process.



Whatever happens, this forum is just the best thing that has happened to my short Internet life. You are all solid.

[Flamingo]

Easy option....let go of the house and go out and pay rent to someone else to rent their property; no guarantee you will ever be able to get a house/mortgage again. Up to you.

[espo1357]

Easy option....let go of the house and go out and pay rent to someone else to rent their property; no guarantee you will ever be able to get a house/mortgage again. Up to you.

It seems like I am already renting, since I will not have equity for another 10-15 years.

Besides, I should be able to buy again, in about 5 years.

Common sense tells me to walk.

[espo1357]

It's your choice, which you have to make. Business sense says walk away if you're that underwater, but you have to weigh everything. If you had the house during the 13 filing, they cannot come after you; however, your monthly payment to the trustee will increase if you have lower rent if you walk from the house.

If you decide to walk away I'd do it before exiting the 13.

Ya, right.

If I am going to walk, the time to do it, is when I am in the 13, correct?

If I let the BK 13 get discharged, and then let the underwater house go, they might come after me.

Another reason to just let it go now.

The challenge I have now is to figure out how much time I can stay in the home until they kick me out.

[momofthree]

If I let the BK 13 get discharged, and then let the underwater house go, they might come after me.

This is incorrect. Just like in a ch.7, your liability is discharged upon plan completion. You can let it go at any time in the future and can't be held liable for any deficiency balance.

However, if you let your bk get DISMISSED and then walk away from the house, they can come after you.

[espo1357]

This is incorrect. Just like in a ch.7, your liability is discharged upon plan completion. You can let it go at any time in the future and can't be held liable for any deficiency balance.

However, if you let your bk get DISMISSED and then walk away from the house, they can come after you.

there it is. That was the information I needed. I can still walk AFTER the chapter 13, and be fine.

Of course, I will run that by my lawyer also.

thanks for the information!

[elflaco]

There are some additional things you need to consider.

A. If you have a 2nd or 3rd mortgage that are not being wiped out by the BK and walk away after your discharge, depending on what state you live in the holders of the 2nd or 3rd can come after you for that amount putting you right back in the same place you were (or darn close).

B. Again, depending on what state you live in, surrendering your home may be an option. In the State of Nevada, if you surrender your home in BK, you surrender it for the full amount, including any 2nd or 3rd mortgage. No payback for the home is included in your payment to the trustee.

So, another option might be to surrender your home and rent (though a payment increase may occur), get fired, convert to 7 and then walk away.

I only comment as we've been there. We were nearly $200,000 upside down on our house, and we would have needed to stay there for 20 years to just break even again (if ever) so decided "eff this" and surrendered. It's only a box after all.

You just need to speak with your attorney about any plan on which you intend to embark as you don't want to get screwed again a few years down the road...

[LadyInTheRed]

A. If you have a 2nd or 3rd mortgage that are not being wiped out by the BK and walk away after your discharge, depending on what state you live in the holders of the 2nd or 3rd can come after you for that amount putting you right back in the same place you were (or darn close)

As momofthree already pointed out, this is incorrect.

Regardless of what state you are in, if you file BK and receive a discharge, your 1st, 2nd, 3rd, 4th, 5th, etc. mortgages are discharged, unless you reaffirm them. The bank can foreclose, but they can't go after you for a deficiency, as long as you don't reaffirm the mortgage. That's why most people don't reaffirm their mortgage when they file BK.

Now, if the Chap 13 is dimissed instead of discharged, then a bank can pursue a debtor for a deficiency if it's not prohibited by state law.

[elflaco]

As momofthree already pointed out, this is incorrect.

Regardless of what state you are in, if you file BK and receive a discharge, your 1st, 2nd, 3rd, 4th, 5th, etc. mortgages are discharged, unless you reaffirm them. The bank can foreclose, but they can't go after you for a deficiency, as long as you don't reaffirm the mortgage. That's why most people don't reaffirm their mortgage when they file BK.

Now, if the Chap 13 is dimissed instead of discharged, then a bank can pursue a debtor for a deficiency if it's not prohibited by state law.

Gotcha.

Thanks for the clarification.

[Flamingo]

It seems like I am already renting, since I will not have equity for another 10-15 years.

Besides, I should be able to buy again, in about 5 years.

Common sense tells me to walk.

Five years before we filed bankruptcy we were doing so well if someone told me we would be filing a Chapter 13 in 2002 I would have told them they were nuts. What you should be able to do and what you can do in about 5 years are two different things. Bankruptcy tosses you in the bad credit arena for several years and it takes a while to get out. There is no guarantee that if you decide to let your home go that you will be able to get a mortgage for quite a while.

And you are not renting although I understand what you are saying. Your montlly payment in part decreases the balance owed on your home whereas a rent payment goes to the owner of the place you are renting for his/her benefit. You receive no benefit just the use of the rental.

[olivies]

Wise advise from Flamingo. Also, the interest rate you get in a few years will in all likelihood be punitive. With your loss of income, have you figured out how to save up the down payment? If you are guesstimating to be upside down 50K in 5 years in your current home, and will need 30K (20% on a 150K mortgage) in five years that's only a $20K difference. I am curious how you are basing your home value because you say it was worth $100K more than it is now less than a year ago. Most housing markets saw their biggest plummets well before that.