Negotiate mortage at end of CH 13 plan?

[frustrated51]

We have entered our last year of a 5 year plan. Wondering if the house is worth keeping. Values where we are still very low even lower than at the crash because of gasoline prices and foreclosures in the last couple years. We have paid all the late stuff and all the fees and are caught up. The mortgage is paid through the trustee. In 2007 our value was 160% what we owe now. Currently my guess based on the bank owned home next to us that is bigger and has more acreage is that our value is about 60% of what we owe. We drive 30 miles each way to work.

Should we give it to the bank before the end of the plan? Can we negotiate a new value for our debt based on what it is worth instead of a short sale? To sale it needs a new septic system (approx. $20K) and a new well is probably on the very soon list also.

[tobee43]

this is really something you need to decide yourself. i know for us it was worth walking away, but those were different times, although you say the value is still really low. you alone must decide on what is best for you. if the mortgage is still high and something you cannot afford i would think about walking. however, if you are paying a reasonable amount to house your family, you may want to give it a second or even third thought.

[frustrated51]

Thanks Do you think they would negotiate the value of the debt? We can afford it and it is the price of gas that is killing us though, but moving closer to work would not be cheaper housing wise.

[LadyInTheRed]

Remember that in a Chap 13, your mortgage is not discharged if you do not surrender the home in your plan. At this late date, you may or may not be able to modify your plan to surrender the home and get the mortgage discharged. Ask your attorney.

Once your Chap 13 is closed, you could try to modify the loan. I don't think you will have much luck with a modification if you have the ability to make payments (e.g., if your payments are no more than 1/3 of your gross income). If you don't get a modification, you will probably have to default on the loan before you can get the bank to discuss settlement. If the loan is discharged, you will have more leverage for a settlement.

I think you should to start by assuming you will not be able to modify or settle the loan and decide whether it is worth keeping the home and paying the loan. If you decide it is not worth keeping, than you need to talk to your attorney right away about modifying your plan to surrender it.

[frustrated51]

Remember that in a Chap 13, your mortgage is not discharged if you do not surrender the home in your plan. At this late date, you may or may not be able to modify your plan to surrender the home and get the mortgage discharged. Ask your attorney.

Once your Chap 13 is closed, you could try to modify the loan. I don't think you will have much luck with a modification if you have the ability to make payments (e.g., if your payments are no more than 1/3 of your gross income). If you don't get a modification, you will probably have to default on the loan before you can get the bank to discuss settlement. If the loan is discharged, you will have more leverage for a settlement.

I think you should to start by assuming you will not be able to modify or settle the loan and decide whether it is worth keeping the home and paying the loan. If you decide it is not worth keeping, than you need to talk to your attorney right away about modifying your plan to surrender it.

Thank you. Yes, I understand it isn't discharged without giving up the home. What I was thinking was just a reduction in the amount owed instead of getting it back because they would probably only be able to sell for 50-60% of what we owe, if that. I thought we might have more leverage to negotiate that while still in BK rather than after because our income is enough for the payment. It is just with the gas prices and bad real estate prices nothing here is selling so I am sure the bank does not want it.

[LadyInTheRed]

Principal reductions are rare. It can't hurt to ask, but the bank doesn't have any incentive to settle on a current loan. Don't be surprised if they won't even talk to you without a letter from your attorney saying it is okay. Good luck. Please let us know how it goes.

[frustrated51]

Principal reductions are rare. It can't hurt to ask, but the bank doesn't have any incentive to settle on a current loan. Don't be surprised if they won't even talk to you without a letter from your attorney saying it is okay. Good luck. Please let us know how it goes.

I know they won't talk to us at the moment and the atty will have to do it which is why I haven't done it. I do think they have incentive to reduce the principle because we owe a lot more than they will get if they sell it and they will have to invest $30-40K in it to sell it. They could reduce our debt 50% and probably come out ahead. I would be thrilled with a 25% reduction.

[dmc-2008]

This just sounds like what people were begging banks to do a few years ago so they could stay I. Their homes without short sale or a bk. I don't think banks have grown more apt to work with people. But I hope I am wrong. Good luck!

[LadyInTheRed]

I know they won't talk to us at the moment and the atty will have to do it which is why I haven't done it. I do think they have incentive to reduce the principle because we owe a lot more than they will get if they sell it and they will have to invest $30-40K in it to sell it. They could reduce our debt 50% and probably come out ahead. I would be thrilled with a 25% reduction.

While your payments are current, they are very unlikely to do a principal reduction because of a threat that you might default later, unless your loan qualifies for a specific program. They just don't look at it the way you do. I would love for you to find out I am wrong.