Question about "walking away" from our house post Ch 7 Bk

[Gwentopia]

Why do you want to keep making payments on a property that is not in the same town as you and is worth less than you owe on it?

Did I understand you correctly that you have already filed BK?

If so, why is GMAC calling you unsolicited to make any kind of payment plans. Sounds like they are trying to collect a discharged debt to me. That might be a violation of some sort. Maybe somebody else will chime in.

Because it's our house and we put a lot of time and money in the property (we've owned since 2002 and did 99% of the work ourselves - added 1/2 bath, remodeled kitchen, new flooring, new carpet, crown molding, and more) and if there is a prayer of us affording to keep it and selling later when the market eventually rebounds, then that's what we'll do. We only need it to increase by about $10,000 and we could sell without owing. In the meantime we can keep it rented.
Regardless, we can still "walk away" (say if our tenants decide not to renew their lease) but at least for now the payment for the 2nd mortgage will be more manageable.
Why would I dump a house if I can afford to keep it?
I don't consider them offering a lower interest rate as an attempt to collect debt... at least not directly... Just to ease the payment for us in hopes that we'll keep paying (it's all semantics but legally I think they're covered). I certainly didn't mind the call!

[Gwentopia]

to mess around with your escrow, i am pretty sure the chap 7 case must be closed, not just discharged

Also, regarding the foreclosure issue. Dont be nice to the bank. Offer them a deed in leiu IF they pay you. I asked for $1000. That $1000 they pay you will save them tens of thousands in foreclosure fees

See I don't get that... I got people telling me in here that they would still have to go through the foreclosure process if I walk away... now why *would* they if I could just sign over the deed? (would love to if it came to that) But like I said, I saw on GMAC's site that they do not allow deed in lieu unless all other options have failed and we don't have time or allowance to try and fail at all other options.

[JackBondLove]

Agree with BCA2009, stop paying them and pocket the rental income to help with trip expense in Oct.

Isn't that illegal?

[JackBondLove]

we were planning to take the fridge and even the dishwasher... I'd really regret taking those items out if my lender attempts a deal and asks that we leave them after we've already removed them!

I believe that taking out items that are considered fixtures is illegal. The fridge is OK, but the dishwasher is considered to be a fixture.

[ssmdem]

Isn't that illegal?

The way it's been explained to me is that once the mortgage loan has been discharged, then no. Before bankrupcty, yes -- if the tenant is paying, you need to pay at least their rent amount onto the mortgage. In my case, it doesn't satisfy the full mortgage, and I have been told that the remaining amount, I am not obligated to pay as far as being "legal" from the landlord point of view. We are surrendering this property - but we've kept the payment completely current and paid in full until we know that our tenant can safely finish out her lease without having to worry about the bank foreclosing. I don't legally have to do that because once I file, the lease converts to a "month-to-month" agreement anyway, but morally I wanted to be able to assure her of a place to live for the entire length of our original lease.

However, I asked the attorney yesterday - after her lease has been fulfilled and I've surrendered the house in the bankruptcy - will all happen about the same time --- if the bank is dragging their feet foreclosing (I'm sure they will. It's in Florida, and it's Bank of America), can I rent out the property at a lower rate and inform the tenants that they may have to move with less than 30 days notice in return for that low rent amount. She said that would be perfectly fine and actually smart to do as the tenants will keep the house occupied and we won't have to worry about liability from a vacant property.

[BCA2009]

Isn't that illegal?

Why would it be illegal to rent out a house that you own?

[BCA2009]

I believe that taking out items that are considered fixtures is illegal. The fridge is OK, but the dishwasher is considered to be a fixture.

What law would you be violating?

[BCA2009]

Before bankrupcty, yes -- if the tenant is paying, you need to pay at least their rent amount onto the mortgage. In my case, it doesn't satisfy the full mortgage, and I have been told that the remaining amount, I am not obligated to pay as far as being "legal" from the landlord point of view.

It would make no difference whether you had filed BK or not. The rental contract and the prommisary not are two different contracts. You are contractually bound by the prommisary note to make your mortgage payments whether the house is rented or not (pre BK). If you don't make the payments the bank can foreclosure. After the BK they can still foreclose. The prommisary note may contractually prevent you with doing something (using it as a business, renting it, etc). But the bank's only recourse is to sue you. If they won, they may get a judgement. But they can't just force (without suing) you give them money you earn from using the property.

Morals and ethics are a differnt matter. If you think you have a moral obligation to rent the property out and give the proceeds to the bank, go right ahead.

[tigerm]

Our experience is.....

If I were in your shoes, I would be talking to a lawyer. I briefly flirted with the idea of doing a loan mod post BK. I talked to a lawyer who said that in order to do that I would have one of two choices.

#1 I could reaffirm the debt on my chapter 7 and then proceed with a modification. By reaffirming the debt we are talking about officially saying that I owe $650,000 all on the hope that my bank will lower the principle on the house that is currently worth 315,000 3 years after we bought it....

#2 I could convert to a chapter 13, strip the second mortgage bringing our total principle to 530,000. And then pursue a loan mod which may or may not do anything to reduce principle. Blah.

In the end the attorney and our accountant (who strongly forecasts a double dip recession - and this guy is NEVER wrong) advised us to get a rental, leave this house and either pursue a deed in lieu or a short sale.

My understanding in all of this was that BK + Foreclosure = no ability to buy a house for a bare minimum of 4 years. And that will be at a crazy interest rate. BK + short sale is more forgiving at first opportunity to buy in 2 years. BK + deed in lieu = 3 years. And these projections are based on what Fannie Mae & Freddie Mac will back.

As far as the specifics of how to walk away. I wouldn't kick out your renters. Check with your state law on this. But out here in Cali, as long as they continue paying rent they are given a 90 day notice after auction. So keep your renters and collect rent on the property until the property goes to auction and becomes someone else's property. The day that property becomes someone else's issue, drop the insurance and utilities. Hands off! Not your home anymore. But, make sure that the ownership has changed hands. Otherwise, creating unlivable conditions for your renters is a no no.

That's the lowdown as far as I know! Good luck!

[frankies_mom]

I don't mean to hijack this thread, but we are also in CT. We are going to let our house go and have our Ch 13 dismissed.We are just too far underwater and the house needs a lot of fixing. We need a fresh start. Anyone know the timeline in CT? We have Wells Fargo. We are hoping to stay a bit to save up some money. Thanks!