Individual Ch 7 during Divorce, and Forclosure

[CleanSlate65]

I am currently in the middle of a very contentious divorce. Filed for divorce mid-2009.

Last house payment made in August 2009.

Currently one spouse (me) has "exclusive use and possession" of the house, per Family Court.

Family Court ordered the home to be sold. House has negative equity (mortgage plus HELOC) of approximately $250K. Occupant spouse (me) files Ch 7 bankruptcy May 2010. Non-occupant spouse wants to short sale the home and claims no desire to file BK despite being unemployed.

Mortgagee has now filed for Motion for Relief from Stay, which I understand is normal. However, I have read online (but don't know if its accurate) that the only remedy for mortgagee after stay is lifted would be foreclosure.

I'm totally okay with this, as my BK attorney says forclosures are taking about a year or more at this time, and as there are minor children in the home, I would like to stretch out time remaining in house as absolutely long as possible. However, non-occupant spouse would like to push for a short sale, despite no apparent financial benefit.

Obviously this situation is sticky because only one spouse is declaring BK, and both spouses desire very different outcomes for the status of the house.

Once Relief from Stay is granted, what are the possible courses of action? Since there are opposing interests with equal rights, is this left up to the Trustee?

How does this affect the rest of the BK petition? Entire rest of debt is unsecured consumer credit card debt (except for HELOC)...

Much thanks...

[newbie2]

I am currently in the middle of a very contentious divorce. Filed for divorce mid-2009.

Last house payment made in August 2009.

Currently one spouse (me) has "exclusive use and possession" of the house, per Family Court.

Family Court ordered the home to be sold. House has negative equity (mortgage plus HELOC) of approximately $250K. Occupant spouse (me) files Ch 7 bankruptcy May 2010. Non-occupant spouse wants to short sale the home and claims no desire to file BK despite being unemployed.

Mortgagee has now filed for Motion for Relief from Stay, which I understand is normal. However, I have read online (but don't know if its accurate) that the only remedy for mortgagee after stay is lifted would be foreclosure.

I'm totally okay with this, as my BK attorney says forclosures are taking about a year or more at this time, and as there are minor children in the home, I would like to stretch out time remaining in house as absolutely long as possible. However, non-occupant spouse would like to push for a short sale, despite no apparent financial benefit.

Obviously this situation is sticky because only one spouse is declaring BK, and both spouses desire very different outcomes for the status of the house.

Once Relief from Stay is granted, what are the possible courses of action? Since there are opposing interests with equal rights, is this left up to the Trustee?

How does this affect the rest of the BK petition? Entire rest of debt is unsecured consumer credit card debt (except for HELOC)...

Much thanks...

You really do have separate outcomes that you want to happen (you and your ex wife).

Once the relief from stay takes place then the mortgage company can start foreclosure proceedings. OR they can talk to you and your ex wife to negotiate a short sale. (The relief from stay in essence also gives them permission to talk to you again.)

If your ex really wants to attempt a short sale instead of having a foreclosure on her credit report, then she could go back to family court and get an order for you to co-operate. Since the family court already ordered the home to be sold, I would imagine this wouldn't be so hard for her to accomplish.

Frankly, I can understand why she would want to try it. A short sale damages the credit less than a foreclosure.

All you can do is follow through with your bankruptcy and see what happens. (Either foreclosure or having to cooperate with a short sale.)

[CleanSlate65]

The beautiful part of this is that the Family Court has NO JURISDICTION over the home while it is in bankruptcy. Does the Motion to Vacate Stay "remove" the home from the bankruptcy petition, or does it merely give the mortgagee the ability to renew their efforts to collect/foreclose? In other words, the house would still be under the authority of the Trustee would it not?

[CleanSlate65]

Oh and with regard to the ex's claim to want to preserve her credit, the community debt burden is approaching the $900K mark, and the house has about $550K equity. So I can't really imagine there would be any "saving" of any creditworthiness by doing a short sale. Everything I've read says that if you are facing BK, a short sale is a stupid choice. Is that the case?

[newbie2]

Oh and with regard to the ex's claim to want to preserve her credit, the community debt burden is approaching the $900K mark, and the house has about $550K equity. So I can't really imagine there would be any "saving" of any creditworthiness by doing a short sale. Everything I've read says that if you are facing BK, a short sale is a stupid choice. Is that the case?

It's not a short sale if there is equity. If you have $550,000 in equity in the home then that would certainly be something that the trustee would be interested in.

Since your ex is not filing bk a short sale for her would not be a stupid choice. For you, it's probably not worth the bother. I have no idea how the BK court would view a family court ordered sale. That is something you really need to sit down with your attorney and discuss.

[CleanSlate65]

My apologies, I mis-spoke.

The house is WORTH about $550K. Owing on the house is well over $750K, on top of about another $180K in revolving consumer debt. I used "equity" when I should have used "value" or "worth".