Do I Still Own My Home

[bb92595]

We were granted Chapter 7 bankruptcy in early 2009. During our filing we had requested that our 1st & 2nd mortages be re-affirmed. We had NEVER been late on any payments of any kind (mortages or other debt). After our paperwork was finalized we were shocked to find out that because of an error on the part of our bank, our mortages were included in the Chapter 7 filing. Despite this error, we have continued to stay current on all of our payments and still have a perfect payment record.

But, I am still troubled with the question of whether or not we still "technically" own our house and whether or not it is smart to keep up these payments on a house that is $140K upside down. Maintaining our perfect payment history does not benefit our credit report because the mortages are listed as Chapter 7 BK.

Because I make 2/3 of what I did two years ago we are struggling to stay above water and have no money left to save. We could easily fix this problem by walking away and renting which would immediately reduce our monthly payment by $1000-$1200 per month and give us some breathing room.

Filing the BK was nerve racking enough and now we are faced with the tough decision of walking away from our house. We are exploring options with our bank (Credit Union) but we are reluctant to sign a loan modification (1% for 5 years and then pay more later on) because it could re-commit us to a house that likely will never again reach the value of what we currently owe.

My gut tells me we should walk and take advantage of the mistake made by the bank. I do not think our credit can get any worse if we walk away because our commitments all show BK - voluntary payments.

Can anybody offer any advise in this situation? I have not seen any posts with issues similar to ours? I have a feeling I will be told I am nuts for waiting this long to make the move and throwing away $12,000+ in mortage payments on a house we don't own since our Chapter 7 was finalized.

Any feedback is appreciated!

[keepmine]

Head for the hills!
You're are throwing money down a rathole trying to hangon to something with upside down by that much.Particularly since your income has been reduced.

[Flamingo]

Of course you still own your home. Try not making a mortgage payment or let your house insurance lapse and someone falls and gets hurt on your property. Guess who is liable - you as the homeowner.

When and if the title changes hands from you to someone else, either via sale or foreclosure, as long as the house is in your name it is yours and your responsibility.

[tcreegan]

no reaffirm

Hello bbb9525,

You still own your home (technically) but the contract w/ the bank went away with the discharge. They can repossess their collateral at any time. It sounds like walking away is your best option. Call the bank and tell them you want to do a "cash for keys" program. Some people on this forum have worked with the bank, signed the title over avoiding a foreclosure, left the place ready for market, and got paid $$$ for doing this.

Something to definitely check out!

Tom in Colo

[wow]

This is confusing to me also. I also was never late (crossing fingers here) not upside down want to keep my home but I assume had to list my mortgage in the BK paperwork. Never really gave it a thought until I received my statement.

It said that I was volunteering to pay and in no way responsible to pay for this debt and they weren't trying to collect a debt. As long as I remained with in the terms of making payments on time they would not foreclose on me.

I'm assuming this NEVER goes away? What happens say in 2/3 years I want to sell? Also do they report in a positive way to credit agency's?

I'm aware it's to late but was it necessary to even list this debt in BK? I assume there was no option as my lawyer knew I wanted to retain my home.

[blockhead]

They (the bank) can't repossess unless state law allows them too, and in many states just because you discharged the debt in BK and didn't reaffirm doesn't let them do anything like that (including accelerate the note) unless you fall behind in payments.

Check with your attorney as to what is the rule in your state.

[LadyInTheRed]

The bank will probably not report positive info on your credit report.

If you sell the house and it is still underwater, the bank will get whatever is left after paying sales commissions and any property tax that's due. Your personal liability was discharged in your BK, so you will have no further obligationt to the bank and they cannot report anything negative on your credit report. To do this, you must get the bank to agree to a short sale. From what I've read, it's hard to get a bank to agree to a short sale. Besides, there's no point in going to the trouble if the debt was discharged in your BK.

If you are ready to walk away, stop paying the mortgage and continue to live there for free until they foreclose. That could take awhile and the foreclosure won't show up on your credit report since the debt was discharged. Just make sure you keep the insurance paid up until after the foreclosure.

Yes, it was necessary to list the debt on your BK. All debts must be listed even secured debts that you intend to keep paying.