Firefighter in need of help....please.

[Fireguy40]

Hello to all,

My wife and I are currently in the home stretch of our Chapter 13 repayment. We are in a 100% repay. We have about 4 of payments remaining of a 4-1/2 year plan. We put both vehicles and all credit card debt into bankruptcy but did not include our home. We have been faithfully paying our mortgage through Bank of America the whole time. As we get closer to ending this whole process we now see that our home value has drastically fallen ( big surprise huh?) We have a mortgage of $75k on a house that might be able to sell for $40k if we are lucky in this economy. The neighborhood has changed for the worse and we can no longer stand to live here. I am a full time Firefighter and also a into management in my second career. I now make a very good living around 100k. My credit is slowly improving 663 and we now are almost completely debt free ( minus the house). Now heres my question.....

Wanting / or should I say needing to move to a better neighborhood for my family, what is the best course of action to take here? My current mortgage is also killing me with a 8.75% interest rate (tell me about it). I am terrified of hurting my slowly improving credit score. I would have absolutely no problems foreclosing on this if that is possible as renting this house out would also be a big nightmare. But will this do damage to my score? And is there still time seeing I am only 4 months from being done. My attorney isn't much help as we have been trying to call him for the past 2 weeks and he still hasn't returned our calls. Would refinancing my current home to get a better rate hurt my ability to buy a new home? I would like to purchase a new home as soon as this plan is done...most likely spring of this coming year....thanks to any who read all the way through this. Any help is much appreciated.

[tobee43]

how are the rentals doing in your area?

is it possible to rent out these premises and move yourself out....thereby turning this liability into an asset. and if your mortgage has a clause that would accelerate the mortgage if you did not live in the primary residence, and call in the mortgage, i would just hand them back the house?

you can rent yourself for a bit until things start looking up and you can get yourself into a better neighborhood. just a thought.

[tobee43]

OH!!!!! and so sorry i almost forgot...

welcome to the forum Fireguy!

[Fireguy40]

tobee43... Thanks for the quick reply. however I do not quite understand the phrase "accelerate the mortgage and give it back to them"? Would that be foreclosing on it? Is that going to destroy my steadily improving credit? I am also told that I would be responsible for the difference of what the bank sells it for. But as much as I do not want to rent it out sometimes I feel this is my only option. Any idea if refinancing this loan to get a better rate would hurt my ability to buy another home when this is over? If I could refinance this house and get a smaller monthly payment (600 now) but the principal never goes lower when I make payments as its a 30 year with 8.75%, I could realistically rent this for 600 a month.

[LadyInTheRed]

I don't think refinancing would hurt your chances of a future mortgage. But, you aren't going to be able to refinance an underwater mortgage. Call your attorney's office and ask for an appointment to meet with him so you can discuss whether you can still modify your plan to surrender the house so that the mortgage is discharged.

[Fireguy40]

LadyintheRed,
If I can modify my plan, would that mess with my current payments that are ending in 4 months? I have asked my attorney about this in the past and he would always say that I would be liable for the difference when the house sells. I am pretty sure that the house would not sell til well after my bankruptcy is completed. would they then come after me? This option is the one I am really most interested in to be honest with you. Honestly the neighborhood has really fell apart and to get a decent family in there will be nearly impossible. Would letting house go, change my credit score of late? Sorry for so many questions but my attorney is not much help and seems like he is done with us now that we are almost done and he got all his money.

[keepsmiling]

Hi Fireguy, welcome to the forum!

If you surrender the house in bk you cannot be held liable for any difference when the house sells. That's kinda the whole point of surrendering
But you have to get moving on this since you are almost out of bk.

I don't know about it affecting credit score-strikes me it shouldn't make that much difference - but that should be the LEAST of your concerns right now.

[Fireguy40]

I just read the Ohio is a Recourse state. So am i understanding this correctly that if I do "walk away and surrender the home" that the lender can come after me for the difference if/ when it sells? Even if the bankruptcy is over and done by then.

[tobee43]

I just read the Ohio is a Recourse state. So am i understanding this correctly that if I do "walk away and surrender the home" that the lender can come after me for the difference if/ when it sells? Even if the bankruptcy is over and done by then.

again, that's the point of the bk and listing the mortgage so the balance of the mortgage is included in the bk. i don't know why your atty would say that to you, as long as it is included in your bk, you are good to go, and the bank cannot come after you for the balance owning after the sale, it as stated above.

if you chose to not file and just walk, or a short sale, being that ohio is a deficiency state, they can come after you for the balance. and, unfortunately, since the debt relief act of 2007 is up in 2013, you could be hit tax wise as well if you did not close your case prior to that dead line.

acceleration means calling in the mortgage. in the "old" days if you rented out your primary residence many banks put a stipulation clause in the body of mortgage instrument that you must be living there and not renting the premises or the banks would come back to you and have you either refi at a higher rate or call in the balance due, or just turn over the house back to the bank, with a RELEASE indicating there is NO BALANCE due or owning so they cannot come back to you. this stems mainly from the fact that commercial lending rates are far higher than those of consumer rates. i.e. you want to buy a house for yourself it's 4.9% you want to buy a house for business it's 8.5%.

as lady points out to you, if you house is underwater you really have difficulty trying to refin the loan. i actually know someone close to me with a credit score of 820, high high income, never a bk, their house is one of the RARE ones, that is NOT underwater, and it took them months to refin their loan! and, almost didn't get it!

again, if there is no threat of them calling in the mortgage i would see what rents are going for in your area, see if someone can do a land contract on it, see if any brokers in your area are working with people to get them houses. also, wouldn't you be best off even if you rented it at a loss and had to kick in a few dollars for a few years until you can buy something

[LadyInTheRed]

i don't know why your atty would say that to you, as long as it is included in your bk, you are good to go, and the bank cannot come after you for the balance owning after the sale, it as stated above.

I wonder if the context in which the attorney said that was not in the context of modification, but instead assumed the plan would be completed as confirmed, in which case it is true that the mortgage would not be discharged in a Chap 13. Fireguy40, if you haven't already, you need to specifically ask about modifying the plan to surrender the house. I don't know if it can be done this late in the plan, but people have reported doing it pretty late. You will probably have to pay additional attorney fees for the modification. If your attorney won't discuss it with you, you might want to try consulting with other BK attorneys. It may be difficult to find one who will take over your case, but it's worth a try.

[tobee43]

I wonder if the context in which the attorney said that was not in the context of modification, but instead assumed the plan would be completed as confirmed, in which case it is true that the mortgage would not be discharged in a Chap 13. Fireguy40, if you haven't already, you need to specifically ask about modifying the plan to surrender the house. I don't know if it can be done this late in the plan, but people have reported doing it pretty late. You will probably have to pay additional attorney fees for the modification. If your attorney won't discuss it with you, you might want to try consulting with other BK attorneys. It may be difficult to find one who will take over your case, but it's worth a try.

i think you may have hit it right on the button! that makes perfect sense, thanks lady.

[Fireguy40]

Ok let's see if I am understanding this correctly. if I can have my attorney modify my plan, include the 70k mortgage in my current 13. Seeing as I only have about 4 months remaining ( a lot of creditors did not file so my 5 year plan will be paid off in a little over 4) , will this tack on more months to make this happen? Are my payments going to stay the same? How is the lender going to get their money? Sorry for so many questions but I really want to see what my best option is.

[LadyInTheRed]

Ok let's see if I am understanding this correctly. if I can have my attorney modify my plan, include the 70k mortgage in my current 13. Seeing as I only have about 4 months remaining ( a lot of creditors did not file so my 5 year plan will be paid off in a little over 4) , will this tack on more months to make this happen? Are my payments going to stay the same? How is the lender going to get their money? Sorry for so many questions but I really want to see what my best option is.

If you are an over median Chap 13, your plan would extend to 60 months because the deficiency would create more unsecured debt to pay. Your payments will only change if you are not already paying all of your DMI into the plan. Another consideration in the plan payment is the mortgage payment. If the rent in your area is less than your mortgage, that could also cause an increase in your plan payment. If you did get a modification approved, the mortgage company would probably be allowed to file a late claim for the deficiency. It's hard to determine the deficiency until the foreclosure sale happens, which isn't likely before you plan is done. My guess is that the mortgage company would file a claim in the amount it believes is the deficiency. If you or the trustee or another creditor objected to the claim amount, that would either be resolved by agreement or the judge, or your case would stay open until after the foreclosure sale. Regardless of how the amount of the deficiency is determined, the mortgage company would be entitled to payment on the deficiency. So, your plan may no longer be a 100% plan. If the trustee has been making payments to your unsecured creditors, those creditors may have to return some of the funds so that the mortgage company can get a pro rata share of payments to unsecured creditors.

This is all an educated guess based on my knowledge of how a Chap 13 works. I have never gone through a modification myself, but have read a lot about them here. It is important that you get the advice of a competent Chap 13 attorney, whether that is your current attorney or another one.

[Fireguy40]

So if I get wi my attorney and he can do a modification of plan to surrender the house. If possible, my payment could change depending on what my new rent is going to be ( but in all honesty I would probably stay in this house til we got kicked out)....(wouldn't this be like rent free for a while?). When do they actually kick us out? Is this considered a foreclosure if we do it this way? Am I correct in my thinking that Awe would probably have to rent somewhere as buying a house would probably not be an option anymore after this?
I just want to thank everyone for all the help so far. We are truly great full for such knowledgeable and helpful people on here!

[LadyInTheRed]

If you modify, your expense for housing would probalby be the going rental rate in your area. But, that doesn't mean you have to move out. You won't get kicked out until after a foreclosure sale. How long that will take is hard to say. It could be a few months or a couple of years. Yes, you will have to rent, but you'll be able to buy again someday if you get your credit report clean. Plan on waiting at least 2 years from the foreclosure before you can qualify for another mortgage.