Thinking of filing Chapter 13 to forestall foreclosure: Just got discharge on Chp.7!

[calidebtor]

I wanted to see what you guys think.
I just got a discharge on my chapter 7 on November 2, 2010. Here are the facts:
0. House is worth $505K(Thats the best short sale offer I have on it right now!).
1. 1st Mortgage is $470K Principal + $100K in arrears and fees with HSBC, they are moving forward with foreclosure sale.
2. 2nd mortgage is $425K including arrears etc, with Chase, and totally underwater. They have "written it off", so when I call the bank, they dont show it in their system! But there's a collection agency that calls me on Chase's behalf(they say they dont own the debt, just collecting for Chase). When I mention that I have a short sale offer and I need them to work with me, they say we will not do anything till we get some sort of payment from you! So they are stalling the short sale!
3. I would like to live in this house as long as possible, best case would be till the end of school year in end of May 2011!
4. Short Sale has been submitted to HSBC and they did their review etc, and want a counter offer from buyer of around $540K! Thats not goin to happen and I think the buyer might even move on soon... too long of a wait!

So what can I do to stay in teh house as long as possible? I was thinking that after the short sale is canceled by the bank, and they remove any "holds" on my foreclosure, that I should be ready to file Chapter 13, making a claim with the courts to remove the lien from second mortgage, because thats holding up the short sale and they are non-cooperative/totally unsecured.

What do you guys think?

[justbroke]

While a Chapter 13 is designed to keep property, you probably should be thinking about what you want to do in the grand picture. (I think that's what you're asking.)

From a Strategy standpoint, the Chapter 13 right after Chapter 7, is not going to hurt as bad!!! If you filed for Chapter 7 in 2010, then it won't fall of your credit report until 2020. If you filed a Chapter 13 in 2010, it would fall off your credit report in 2017!!! So, from a credit-hit standpoint, I don't think there is much issue. (Albeit I'm not an expert -- nor anyone is -- with how the Fair Isaac FICO store is created with intricate levels of details.

So, it would only stall the foreclosure for... maybe 45-75 days... that's if you don't file a Chapter 13 Plan of Reorganization (by day 14) that has a plan to cover the arrears on the first mortgage. You don't have to file the plan until 14 days after filing. But, it would need to include not indicate that you are surrendering the home to the first mortgage holder. Let's just say you were on the up and up and indicated surrender. The lender, probably by day 21-30 would file a Motion for Relief From Stay (RFS). That would be done on negative noticing or a hearing. That's another 30 days delay. Once that hearing is held or a "default" order granting the RFS is granted, there's some lag, but the lender can "resume" foreclosure based on your State's underlying non-bankruptcy laws. I say that's a 60-75 day delay right there. (Justbroke's note: the serial filing punishment doesn't apply here since the debtor received a discharge in the prior case. Otherwise, if the prior case had been dismissed, the debtor would need to file a Motion to Extend Automatic Stay as a "first day" motion.)

You probably won't be able to lien strip the second since it is discharged and you won't receive a discharge in your Chapter 20 (Chapter 7 followed by a Chapter 13). I'm still thinking that a "bad faith" argument can be made that you're doing this solely to hinder or delay the creditor(s). This may come from the creditor or the Trustee and is purely speculative on my part. They should "see" what you're doing.

Unless, you're going to mount a challenge on the ownership of the note and just have fun with that for 30-60 days.

In the end, you could manage to squeeze out 5, 6 even 7 months with this Chapter 20. The downside is what are you really wanting to do? For example, why are you even worried about a short sale? At this point, post discharge, you have no liability or legal responsibility to pay. You can walk away.

[biotechsolution]

You forget that if you want to keep the house, which would be your goal of the Chapter 13, you have to include the arrears in your plan payment.
So if your 100K in arrears that would have to be paid off in the 60 month plan. Not to mention that you won't be able to strip the 2nd in the Chapter 13 anyway because you've already received a discharge.
So you could file but be prepared to submit a plan payment to get your current on the mortgage and send off the first payment within 15 days of filing.
100,000/60+$1667.00 . MIght be easier to play the waiting game in the foreclosure court.
But realistically you may have to start looking for someplace new.

How long have you been in the house so far without paying?
How long do you expect to stay without paying?

[newbie2]

Calidebtor, in my opinion it surely isn't worth it to file a Chapter 13 at this time. From reading your previous thread about this: http://www.bkforum.com/showthread.ph...elay-discharge to this one, it appears that nothing has changed. (You still owe an enormous amount in arrears on your first mortgage, and you are seriously underwater with this home.)

Save your money right now and stay as long as you can. Good luck to you.

[momofthree]

When you file a chapter 13, you begin making payments right away. To stay in the home, you would have to include the arrears into your payment ($1667) as well as make the regular payment on time each month (guessing that's at least $3000), so you're looking at paying at least $4800 a month to stay in the home. If you don't include the arrears, then they won't let you stay in the home, and if you don't make your trustee payment or regular mortgage payment on time each month, you'd get your case dismissed pretty quickly and be back at square 1. I don't think this plan would work out well for you. You might be able to stall for a month or 2, but you'll have to pay a pretty big chunk to the attorney up front too (ch.13 cost about twice as much as ch.7), so would you really be saving money?

[calidebtor]

First of all, THANK YOU everyone for responding! I truly appreciate your advice and take it into consideration. Im replying late because Ive been sick(Flu?) for the past 3 days and completely knocked off my feet...

Anyway, just to clarify, my GOAL is to delay foreclosure of the house as long as possible so that I can stay here rent free as long as possible, not to actually retain the house. I know its too upside down to even bother trying doing that. I can get similar houses for $450k these days, and im pretty sure that the market will drop anohter 10% if not more. So Im in no rush to buy anohter house. I jsut want to delay foreclosure to the end of school year so that we move during the summer when my kids school is out.

Also, I will be filing everything myself as I did for my Chapter 7. So there are no attorney fees involved.

Will write more specific responses later to you guys...

[justbroke]

Anyway, just to clarify, my GOAL is to delay foreclosure of the house as long as possible so that I can stay here rent free as long as possible, not to actually retain the house. I know its too upside down to even bother trying doing that.

The real problem is that your case may be considered filed in bad faith, because the house it so upside down. The strategy may only give you 4-6 months more time.

[biotechsolution]

I can't even see how she would get 4-6 months because you have make your chapter 13 payment within 15 days of filing.
How long have you been in the house without paying?

[Pandora]

While I understand the desire to stay in your house due to your children's school situation...why not just rent a house in the same school district? I'm not understanding why you'd want to file a 13, go through all the hoops and motions (plus filing fees again) - just to delay the inevitable? Spend your time and money more wisely, save all the aggrevation, time off of work attending court meetings, etc and look for a new house to rent in the same district. As justbroke mentioned, you wont be able to strip your 2nd as you wont receive a discharge in your 13 given the time between your Ch. 7 and Ch. 13. Also as biotech and others have mentioned, you'll have to pay your Ch. 13 payment within 30 days of filing. You're losing money in the end..not saving.

Not to mention you'll have 2 BK on your record....

[justbroke]

I can't even see how she would get 4-6 months because you have make your chapter 13 payment within 15 days of filing.

Very true, but the fact that she filed doesn't abate the automatic stay and the lender would still need to take additional actions. It's a minimum of about 45-60 days (1-2 months), if the lender is right on top of it. I think the whole plan area is an issue.

Payments aren't a problem since I suspect that the debtor/poster would "surrender" the home based on the Plan. If we're thinking that the debtor proposes to cure... that's a whole different "game" that I don't condone.

The squeezing out 4-6 months is based on a challenge to ownership of the promissory note, if it is a viable defense to a motion for relief from stay. However, these are just all games at this point.

[jetsfan2010]

tough spot to be in..honestly is it really worth it to go through all this to try to stay in a house? Talk to an attorney and be upfront about your situation, but dont rule out any option. That could mean being ok with walking away from the house too.

[calidebtor]

I've been in the house without paying for almost 2 years now. But I am also out of a job. The reason why I would prefer to stay in the house till school year's end are 3: a) Want to move only once to an area thats going to be more central to our needs, so I would like to only move once in the next 2-3 years if at all possible. If I could stay in the house till end of May, 2011, then I only need to move once and to the area where I'd want to stay for the next 5+ years. Otherwise I move in the same area as now DURING the school year and then again during summer to where I want to be! b) Live rent free till May, 2011 and save up as much as possible. c) Dont want to move in the middle of the school year, the physical move itself would be kinda disruptive for kids, and if I were to move again in summer, it could cause more disruption to their lives.

Having said that, as of now, our lender keeps on moving our sale date by a couple of weeks, and last I called they still have the "Bankruptcy hold" on our file so they are still moving it forward. It could be because of the short sale offer we have to them or it could be an oversight. I have a feeling that if I were to file a dummy Chapter 13, and if it were to give me 45-60 days more delay, that would in turn probably give me more of a delay on the bank restarting the foreclosure, maybe another month or so, if not more. So each time there's bankruptcy, it adds delay to the sale from the actual process first, and then further delay from the bank's process itself. So I think Im probably going to be good through this year because of the short sale offer, just going back and forth between the bank and the buyer... but if the buyer backs out, then they probably would move towards foreclosure in January, thats my guess. Right now the hold is still on and the date's been moved to mid-december.

So I would only need to stretch it out another 5 months if they removed the hold in January.

Oh yeah, the challenge to the documents? I already tried that last year, long before I filed Chapter 7. My darn bank has all the documents and their attorney emailed me the whole loan package that I had signed in less than a week after I tried raising that challenge initially when they started the foreclosure process in early 2009! So thats a no-go strategy!

Im not attached to the house emotionally at all(any more!). I am only viewing it from a dollars and sense point of view. What could I gain by maxamizing my stay in this house vs. what I lose. My credit is already shot because of the BK(I havent checked it since Ive gone in foreclosure). Im not planning on buying anything on credit for a long long time. So not too worried about that either.

Ive been doing some research on how much time I would have to move AFTER foreclosure sale, and it seems like this:
1. 3-days only, IF I dont want an eviction on my record.
2. 30-45 days IF i dont leave within the 3-day notice to quit period, but the bank would file an Unlawful Detainer in court to get me evicted, AND I dont fight that unlawful detainer.
3. 2-6 months if I fight the unlawful detainer every step of the way, challenging everything the bank serves me or files in court.

So thats my last-ditch backup, but what it does is puts an "Eviction" on my credit record as well. I would not like to have that on my credit, but I dont mind it if there is significant delay that allows me to stay rent free.

I want to try EVERYTHING else that I can to delay the foreclosure sale itself. Once Ive exhausted all ways to delay that, then I can consider the last strategy as my final option to delay further.

Justbroke: I need some clarity on how I would get 4-6 months more if I file Chapter 13. Im in no mood to spend any more money than the basic filing fees for chapter 13. So one way to go could be to argue in front of the court that I need my second stripped so that I could proceed with the short sale because the second mortgage bank is becoming a hinderance to the short sale! And the second could be simply an effort to try to "catch up" on my arrears, but show my current income which would automatically show to the court that I cant afford it and they would dismiss themselves. I just need to understand the process a little better to see realistically how much more time I would get out of 13? Please help me with that. Thanks.

[newbie2]

I need some clarity on how I would get 4-6 months more if I file Chapter 13. Im in no mood to spend any more money than the basic filing fees for chapter 13. So one way to go could be to argue in front of the court that I need my second stripped so that I could proceed with the short sale because the second mortgage bank is becoming a hinderance to the short sale! And the second could be simply an effort to try to "catch up" on my arrears, but show my current income which would automatically show to the court that I cant afford it and they would dismiss themselves. I just need to understand the process a little better to see realistically how much more time I would get out of 13? Please help me with that. Thanks.

A Chapter 13 filing right now won't help as it would be in bad faith. I really think a trustee is going to see what you are attempting to do (stall for more time. You can't strip the 2nd mortgage because you cannot receive a Chapter 13 discharge. (A 2nd is only stripped upon discharge).

For your sake as well as your childrens, please start making plans to find new housing. You've already been there 2 years without paying which is much more than most debtors receive in free housing. I hope this doesn't come across as harsh, I don't intend it to be, but instead I am being realistic for you and your children.

[Pandora]

Calidebtor

I think you're missing the point here - you wont be saving ANY money by staying where you are because if you file CH. 13 you will be required to send payment within 30 days of filing. That will include any arrears as others have mentioned as well as whatever else is included in your plan. All of this is based upon you stating you're going to cure the debt of course, but what other option is there in filing a 13 at this juncture other than stating you're curing it? You have no other debts as they were all discharged in your 7, including the house. I'm not understanding how you think it would be saving you money by filing. It's going to cost you more in the long run.

Without a job - you cant do a 13 either - its called the "Wage earners plan" for a reason.

[justbroke]

Justbroke[/B]: I need some clarity on how I would get 4-6 months more if I file Chapter 13. Im in no mood to spend any more money than the basic filing fees for chapter 13. So one way to go could be to argue in front of the court that I need my second stripped so that I could proceed with the short sale because the second mortgage bank is becoming a hinderance to the short sale! And the second could be simply an effort to try to "catch up" on my arrears, but show my current income which would automatically show to the court that I cant afford it and they would dismiss themselves. I just need to understand the process a little better to see realistically how much more time I would get out of 13? Please help me with that. Thanks.

I wanted you to think about financially and in your longer term view, what's the better situation. Sure, you could actually drag out the process, make frivolous motions -- or perhaps not so frivolous if you have promissory note issues -- and delay the process. At what CO$T is that though?

Realistically, you won't be able to strip the second mortgage in a Chapter 13 that doesn't have a discharge. This is because you're employing the Chapter 20 process (Chapter 7 followed by Chapter 13). There are a few Districts that may support such, but many of them are now consistent that you actually need the discharge in order to strip the lien (actually the "unsecured" portion).

The decision if ultimately yours, but as I believe I stated in several posts, why even worry about a short sale and why haven't you made the transition to just start to build a new life?

I guess I'm trying to say two things. First, that you could delay the process, but you'd have another bankruptcy on your credit report. Second, why? It makes no financial sense to me or you have not convinced me yet that the short sale and a questionably bad-faith Chapter 13 is the way to go. I would never file Chapter 13 just so that I could complete a short sale.

If you hate the lender and what they're doing... make them eat wood. (Eat Wood: my expression for making the lender foreclose while you have already shed your liability in a Chapter 7. They are then stuck with the negative equity and losses.)