2 years in plan and wanting to surrender house

[JJPoppy]

Hello Everyone,

I accidentally came across this site looking for other people that may be in the same situation as we are. We filed Chapter 13 2 years ago and it has been no picnic since then. We do however only have 1 year left in the plan. We have somehow managed to fall behind on our mortgage payments and are now trying to determine how to dig ourselves out of this mess.....again. I'll be honest I'm not sure what exactly happened other than just being broke. We had missed 1 or 2 payments here or there but thought we had made every effort to get caught up on them. We were even told by the lender we were current as of last month but then this month we were told we were in fact delinquent by nearly 6 payments! I gathered up all our bank statements and counted 20 total payments made out of 24 that were due. We had been making payments regularly each month but in the early months after filing we had missed a few payments but thought those were taken care of. Apparently not. Regardless our bank statements show we only owe 4 payments.

Here is where I need some advice from anyone that may possibly have experienced this or has a best course of action from the outside looking in perspective. We can make all of the payments due within 30 days with no issues at all. 3 of those will be in the next week and half and then 2 more two weeks after that. That should bring us current and we go about life. Unless of course they file a motion to lift the stay. We could have our attorney argue that we recently paid off both of our cars and are in a better financial position now to catch up on the payments within a month or two at most and then resume regularly scheduled payments. I'm sure that would work...right? We do not have any other debt. Right now the mortgage is the only thing we are paying in addition to our trustee payment. However, at this point I almost don't care anymore. We are at the point where we do need a bigger house near better schools for our kids but we can't sell this one and I doubt we would qualify to get another mortgage on top of the one we have now. I don't know if it's better to let them foreclose, short sale, get caught up and wait for the value to go back up and sell (if it ever does). We want to stay in this house for as long as possible until we can figure out how to accomplish getting out of the house the best possible way.

Our credit scores are pretty much shot right now because of the chap 13 and we also have no credit cards, no auto loans, nothing at all over the past 2 years to help "re-establish" our credit. How does anyone "re-establish" good credit history if you are prohibited from taking on any new debt while in Ch13?!

I'm just confused what we should do to get from point A) get out of this house. To point B) finish this Chapter 13 and get into a bigger house.

Sorry if my post made you dizzy with info.

[LadyInTheRed]

So, is your goal to give up the house even if you could make up payments and stay? It's not completely clear, but I'm assuming that is the case. If you are going to walk eventually, there really isn't much point in wasting money on catching up. Save that money to move to a rental. You probably won't be able to qualify for a mortgage right away because, as you point out, you can't really reestablish credit while you are in a 13.

Why are you in a 13 in the first place? Could you qualify to convert to a Chap 7?

If your mortgage is a recourse loan and you can qualify for a 7, you should talk to your attorney about converting. If you can't qualify for a 7 or have some reason to stay in a 13, you need to talk to your attorney about modifying your plan to surrender the home so that it will be discharged in your 13 and the lender can't pursue you for a deficiency later. Your profile says you live in Colorado where deficiency judgments are allowed according to my quick Google search.

[JJPoppy]

Thanks for responding. We ended up filing Ch13 to save the house and our cars. Looking back we realize that we should have probably just let it go then. Over the past 2 years we have come to realize that this house does not fit our needs any longer. However we have no regrets because we were able to save our cars. However we are now at the point where we need to buy a new car for my husband. At the time CH13 made sense. Over the past few months we came to realize that all we did was buy ourselves 2 years of time and a headache keeping up with all the payments. Now the only payments we have are the trustee and mortgage and we are just ready to move past it all and get to where we need to be for our family. Catching up on the payments right now seems to be the only thing that makes sense until we can figure out how to get out from under this house and into one that fits our lifestyle.

Our lawyer did mention that we can convert to a 7 at any time so we have that going for us. So with all that being said I won't disguise my next questions.

If we convert to a 7 and surrender or continue with the 13 and surrender then how long do we have in this house before we need to move out?
If we surrender in either scenario and begin rebuilding our credit how soon before we can start shopping for another mortgage?
If we keep the house and finish the 13 how do we get out of this house if we are upside down in it?
Is it impossible to obtain another mortgage if we choose to rent out the property? Our income is steady and our employment history is great. 8 years same employer for my husband and I've only had 2 different employers in the last 8 years and neither of us have any plans of a career change anytime soon.

[LadyInTheRed]

If we convert to a 7 and surrender or continue with the 13 and surrender then how long do we have in this house before we need to move out?

It's hard to say. It could be months or it could be years. If the house is underwater, then you are more likely to get more time. Google for information on the foreclosure process in your state to get an idea on the minimum amount of time it will take. From my quick search, it looks like in Colorado, the forelcosure process takes about 4 months. But, most lenders don't start foreclosure until you're 90 days late.

If we surrender in either scenario and begin rebuilding our credit how soon before we can start shopping for another mortgage?

At least 2 years from discharge of a Chap 7 (or maybe 2 from foreclosure following a Chap 7 - reports vary). If you finish your 13, you may be able to get a mortgage quicker than that. Read in the Mortage after BK forum for stories: http://www.bkforum.com/forumdisplay....tgage-after-BK

How soon will you have the money for a down payment?

If we keep the house and finish the 13 how do we get out of this house if we are upside down in it?

A mortgage is not discharged in 13 if you do not surrender the house as part of your plan. The lender could sue you for a deficiency if the house sells in foreclosure for less than the mortgage plus expenses of foreclosure and sale. You could try to get the lender to agree to a shortsale. Check to see if a lender can pursue a deficiency after a short sale in your state. If they can and you do a short sale, you need to get the lender to agree in writing to waive their right to a deficiency judgement.

If the lender won't agree to a shortsale, you stop paying and live in the house until they foreclose and whoever buys it sends you an eviction notice. You can move before that if you want. But, it could be a long time before title is out of your name.

Is it impossible to obtain another mortgage if we choose to rent out the property? Our income is steady and our employment history is great. 8 years same employer for my husband and I've only had 2 different employers in the last 8 years and neither of us have any plans of a career change anytime soon.

If you can show enough income, including rental income, to pay both mortgages, you may be able to get a mortgage on another home. Talk to a mortgage broker to get an idea of whether you would qualify.

If I were you, I would convert to a 7 and get the mortgage discharged, then decide what to do. You can keep paying your mortgage for as long as you want. Or, you can stop paying and live for free for at least a few months. Still being obligated to pay on a mortgage for a home you don't want is not much of a fresh start.

[JJPoppy]

THANK YOU SO MUCH!!! Your suggestion is actually exactly the answer I needed. I think catching up on the payments and converting to a 7 would be the best thing to do. Granted we don't want to be here forever but we are not quite prepared to move within the next few months if push came to shove. We are actually looking at a minimum of 2 years before we even begin shopping so the timing is spot on for a 7. We should have $20,000 at minimum in that time frame to put down if necessary we can slim down on other savings goals and add to that sum easily. Another question if you don't mind me picking your brain just a little more If we convert to a 7 and walk away from this house in 2 years would there be any potential pot holes we would encounter when we go to apply for a new mortgage? What would the lender think if we have one mortgage we were getting ready to walk away from just to get into a new one? Or would we need to walk away from the house long before we apply for a new loan? Right now the only obstacle we need to overcome is catching up on these payments. I just hope that they don't file a motion to lift the stay in the next 2 weeks because we need that time to catch up.

I can't thank you enough for responding. You really did ease my mind and I'll probably get the first good nights sleep in weeks!