Chapter 13 Vs foreclosure...which is better if you absolutely do NOT want the house?

[BKlooker]

What happens if you no long want the house? If you have ample CC debt and other expenses, but make decent money, I know they will try to push you into CH 13 instead of CH7.

My question is simple: Is it possible to get rid of a home in CH 13 if you no longer hand any desire to keep it whatsoever? Which is better….a foreclosure or attempt a CH 13?

My home is so underwater and I can’t afford it in the long term, even with adjusted payments, and even if I could, it’s not going to go ‘above water’ for at least another decade (home has lost 30% of it’s value, and I am still on interest only payments for another year) .

I am trying to decide between just letting the house go to foreclosure i.e. stopping payments and dealing with the deficiency, but I wanted to explore the BK option first because it supposedly “looks better” in the long run (although this is of course debatable) and can help with other debts at the same time.

But if I understand correctly, they aren’t likely to “chuck” the house in CH 13 unless you can file a hardship to prove it, and if you are going that route you probably could get a CH 7 and take care of it in the first place.

The one thing I thought about was possibly going through CH 13 and adjusting payments/principle for the CCs only. If it works out, I would have significantly more money to knock down the principle on the mortgage over say 2 years and then possibly sell it via short sale, but that is still so risky.

My biggest fear is that I could end up in Ch 13 land, and then still be stuck with a house I don’t want at all, and then go to foreclosure, so then I have BOTH a foreclosure and a BK on my record.

Thoughts? Should I just say the heck with BK altogether and “walk away” via dealing with the deficiency?

Small background: 75K student loans, 33K CCs, car loan coming soon, 188K home (only worth maybe 145K now), plus monthly utilities, etc., already starting to falling behind on some stuff.

[espo1357]

What happens if you no long want the house? If you have ample CC debt and other expenses, but make decent money, I know they will try to push you into CH 13 instead of CH7.

My question is simple: Is it possible to get rid of a home in CH 13 if you no longer hand any desire to keep it whatsoever? Which is better….a foreclosure or attempt a CH 13?

My home is so underwater and I can’t afford it in the long term, even with adjusted payments, and even if I could, it’s not going to go ‘above water’ for at least another decade (home has lost 30% of it’s value, and I am still on interest only payments for another year) .

I am trying to decide between just letting the house go to foreclosure i.e. stopping payments and dealing with the deficiency, but I wanted to explore the BK option first because it supposedly “looks better” in the long run (although this is of course debatable) and can help with other debts at the same time.

But if I understand correctly, they aren’t likely to “chuck” the house in CH 13 unless you can file a hardship to prove it, and if you are going that route you probably could get a CH 7 and take care of it in the first place.

The one thing I thought about was possibly going through CH 13 and adjusting payments/principle for the CCs only. If it works out, I would have significantly more money to knock down the principle on the mortgage over say 2 years and then possibly sell it via short sale, but that is still so risky.

My biggest fear is that I could end up in Ch 13 land, and then still be stuck with a house I don’t want at all, and then go to foreclosure, so then I have BOTH a foreclosure and a BK on my record.

Thoughts? Should I just say the heck with BK altogether and “walk away” via dealing with the deficiency?

Small background: 75K student loans, 33K CCs, car loan coming soon, 188K home (only worth maybe 145K now), plus monthly utilities, etc., already starting to falling behind on some stuff.

You are not in terribe shape. I am over 100k under.

Anyway, the 13 is decided on your income. I think you can walk from the home in a 7 or a 13. Up to you.

But, only 43k under, is not going to take 10 years to get equity. Its going to be closer to 5 imo.

Also, student loan debt is irrelevant, as you can't count that towards your BK (it secured debt). They will defer the payments if you are in a 13, however.

good luck.

[BKlooker]

I understand that I am not as bad off as many on here, but the payments on the house are going up 220 bucks in a year. The student loans will kick in as well at the exact same time. Coupled with a new car coming, and it's 1200 bucks a month on top of what i already pay for mortgage, utilities, and other expenses. So in other words, in 1 year, i will be unable to maintain this.

5 years is only going to knock off about 10K in principle, and as noted above, i WONT be able to afford to keep it at 1500 a month for a 1 bed/ 1 bath condo, a 500 buck a month student loan, a 500 buck a month car payment, an 850 a month in credit cards, plus utilities, personal expenses, assisted living for my mother, etc. I only make 3300 in take home pay, so the mortgage would be eating about 50% of my take home alone. Just won't be able to make it.

i don't want to be there another 5 years. The original goal was to sell it or rent it, until i found out i was never allowed to rent it out under the special "first time" homebuyers thing i bought it with. So to move from the house, i need to either sell it, refinance (won't happen while it's upside down), or chuck it in BK or foreclosure.

Trying to be proactive and not end up in witht he noted stack up described herein in 1 year.

[october99]

I'm in a similar situation. We do NOT want the house. Have you looked into whether or not your lender is suing for deficiency balances? I've recently investigated this. I have a loan through a program with the state for first time buyers and they are foreclosing on properties but have not sued one person for deficiency balances. I'm not sure why. We do have PMI which I'm sure many borrowers in the program do since they lended us the down payment also.

I am surprised you aren't allowed to rent it out. I recently asked this and the lender said renting was no problem. Unfortunately, I think we're too far behind to even consider it at this point.

[BKlooker]

Hi October,

I haven’t looked into that yet, but I certainly plan to. I have PMI as well, so they may let it roll. I am in MD, and they only have 2 years to come get you for the difference, which is not a lot of time in relative terms.

Yea the rental clause was what killed my dreams. In addition, while it may seems like I am simply walking away for no reason, my situation is such of being lied to. My original payments were 1035, set to jump up to 1260 after 5 years. Guess what? They “forgot” to factor in the taxes on the payments for the first years cycle. As you can imagine, I hit the roof when the next year the payment jumped up an extra $350 to cover the deficiency on the escrow from the previous year AND cover that year’s taxes. I went 1 month late that year for a couple weeks falling so far behind.

That is how we are going from 1035 to almost 1500. That on top of the little “detail” about never being able to rent (and I confirmed with the lender you can NEVER rent until the home is completely paid off or sold), and I’ve had it. I even told my original real estate broker that the plan was to hold it for a few year, then rent it out and move. She said nothing of this “detail’.

Even if I was renting for a small lose for a few years, it would be worth it to hold the property as an investment while I paid it down. My parents had even agreed to manage the property themselves, as they own many rentals already and are set to retire, so I was just going to cut them 1K a year to help with management locally and I would be set.

I am still young (mid 20’s), and the way I see it, spending another 5 years of my life minimum trying to get rid of this house, on top of trying to juggle my student loans, CC debt, and car/car insurance payments, etc. is not worth it, when within a few years, my credit can be close to or at what it was before the foreclosure, I’ll be free to both move where I want and buy a new home if I want, and I will be done with any possible deficiencies.

In addition, while the house is going through foreclosure, I will be living rent free essentially, and that’s between 10-12K (or more, depending on how long it drags out) can go towards paying off other debts totally. That would knock off more than 60% my credit card debt if you include the minimums I already factor into my budget, probably almost all of it, in addition to making a new car more affordable. When I do reach the point of being forced to leave, I can rent somewhere half the price (750 for a very 1 bed, 1 bath in my area is normal), and I will still be in a better position than I am now.

Where do you look up if they have been suing for deficiencies?

[espo1357]

Hi October,

I haven’t looked into that yet, but I certainly plan to. I have PMI as well, so they may let it roll. I am in MD, and they only have 2 years to come get you for the difference, which is not a lot of time in relative terms.

Yea the rental clause was what killed my dreams. In addition, while it may seems like I am simply walking away for no reason, my situation is such of being lied to. My original payments were 1035, set to jump up to 1260 after 5 years. Guess what? They “forgot” to factor in the taxes on the payments for the first years cycle. As you can imagine, I hit the roof when the next year the payment jumped up an extra $350 to cover the deficiency on the escrow from the previous year AND cover that year’s taxes. I went 1 month late that year for a couple weeks falling so far behind.

That is how we are going from 1035 to almost 1500. That on top of the little “detail” about never being able to rent (and I confirmed with the lender you can NEVER rent until the home is completely paid off or sold), and I’ve had it. I even told my original real estate broker that the plan was to hold it for a few year, then rent it out and move. She said nothing of this “detail’.

Even if I was renting for a small lose for a few years, it would be worth it to hold the property as an investment while I paid it down. My parents had even agreed to manage the property themselves, as they own many rentals already and are set to retire, so I was just going to cut them 1K a year to help with management locally and I would be set.

I am still young (mid 20’s), and the way I see it, spending another 5 years of my life minimum trying to get rid of this house, on top of trying to juggle my student loans, CC debt, and car/car insurance payments, etc. is not worth it, when within a few years, my credit can be close to or at what it was before the foreclosure, I’ll be free to both move where I want and buy a new home if I want, and I will be done with any possible deficiencies.

In addition, while the house is going through foreclosure, I will be living rent free essentially, and that’s between 10-12K (or more, depending on how long it drags out) can go towards paying off other debts totally. That would knock off more than 60% my credit card debt if you include the minimums I already factor into my budget, probably almost all of it, in addition to making a new car more affordable. When I do reach the point of being forced to leave, I can rent somewhere half the price (750 for a very 1 bed, 1 bath in my area is normal), and I will still be in a better position than I am now.

Where do you look up if they have been suing for deficiencies?

Look up the online court system in your town or county. Its there.

If you did not get a summons, then you didn't get sued, yet.

Just don't be stubborn and chuck your mail. Read everything.

good luck.