Selling/Renting House and Credit Score

[4theboys]

We have made 2 payments so far, out of a 5 year payment plan. We have a 3 yr old boy and a 1 yr old boy. In the next 2-3 years, we would like to sell our house. We fell behind on payments, so the arrearage is included in our payments (5K). Our house was valued at 120K, we owe about 96K on it. I know we are required to get permission to sell it. Our credit was horrible to start with, does it usually improve any within the few years after filing a 13? We don't want to buy a new house, but rent a house, and I am worried about being approved by the owner. We would be able to rent a bigger house in a preferred school district for about the same we are paying for our mortgage. Also, if we make any money off of the sale of our house, what happens to that money? Does it go to the trustee? We are in KY. Living in a small two bedroom house with two growing boys, we are running out of space fast.

[lrprn]

Our credit was horrible to start with, does it usually improve any within the few years after filing a 13?

The last thing new Ch 13 filers worry about is their credit scores. Since you need your trustee's permission to get into ANY new debt, why would you want to put yourself on your trustee's radar by waving a big red "I have enough disposable income to finance a house downpayment!" flag in his or her face?

Frankly, trying to buy and finance a home with a minimal downpayment in an active Ch 13 is like 99.9% impossible. Lenders won't want to touch you with a ten foot pole while you are in an active 13. Whatever rates you might be able to get are likely to be outrageous. Most Ch 13ers struggle to finance a used car, never mind a house.

Let's say you are able to sell the house and recoup what you owe to pay off the loan. You currently owe $96K on a $120K valued home and still owe most of $5K in arrears that have to be paid off with the house sale too. Subtract out the buyer and seller realtor fees and you don't have hardly anything left for a downpayment for a new (to you) home.

(We want to) rent a house, and I am worried about being approved by the owner.

In this poor economy, many homeowners who can't sell (at least here in the midwest) are putting their houses up for rent trying to get anything they can to offset the housepayment. The chance of running into a picky landlord who turns up his or her nose when faced with a potential renter with a bankruptcy is much reduced over even a year ago.

Most of our forum members have had no trouble renting as long as they have steady employment and an average-sized family of kids and pets. Given your circumstances, if you are going to try to sell the home, try to find a rental with about the same monthly payment as your current house payment. Most trustees will be fine with that.

...if we make any money off of the sale of our house, what happens to that money? Does it go to the trustee?

It depends on how much money you make from the sale. As I noted above, it may not be much at all.

The best thing to do before moving on any farther with this potential idea is to set up an appointment or call with your lawyer to thoroughly discuss all the positives and negatives given your current plan and your trustee's customs and practices around home sales during an active 13.

Good luck no matter what. Let us know what you find out, ok?

[keepsmiling]

Please note, the OP said " we DON'T want to buy a new house".