Chapter 7 BK and Short Sale...my story and questions...

[ab33arch]

[geye]

Wow, that WAS long ;)

Here's my 1 cent (all I have because I'm filing bankruptcy)

1) finances. You have that backwards. Roof over head always goes before credit card bills. Even if you're not making the house payment now, you will need to pay for something somewhere along the line. You need to figure out how much that is first, and THEN see if you still have enough. Don't use the credit cards. Make a budget. Save receipts. Now is better than never.

2)If you can afford the bills, why did you fall behind and use credit cards? Have you done a means test yet? google Nolo means test and have at it. You'll know a lot more where you actually stand after doing that. As for timing, that depends on a lot of things. My mortgage company wouldn't let me do a short sale, BTW. What did your attorney say the timeline was?

3)The creditors will continue to collect. Some of ours quit calling after we told them we had retained an attorney, but started calling again after a month.

4)We switched banks. Not an issue. Our paper trail shows xx bank slowly piddling to nothing with bills and being closed with $10 being taken out. New account opened and starts being used.

5)I can't comprehend why you're even considering a short sale.

6) We were told not to pay the property taxes. They go with the house.

HTH

[ab33arch]

Wow, that WAS long ;)

Here's my 1 cent (all I have because I'm filing bankruptcy)

1) finances. You have that backwards. Roof over head always goes before credit card bills. Even if you're not making the house payment now, you will need to pay for something somewhere along the line. You need to figure out how much that is first, and THEN see if you still have enough. Don't use the credit cards. Make a budget. Save receipts. Now is better than never.

2)If you can afford the bills, why did you fall behind and use credit cards? Have you done a means test yet? google Nolo means test and have at it. You'll know a lot more where you actually stand after doing that. As for timing, that depends on a lot of things. My mortgage company wouldn't let me do a short sale, BTW. What did your attorney say the timeline was?

3)The creditors will continue to collect. Some of ours quit calling after we told them we had retained an attorney, but started calling again after a month.

4)We switched banks. Not an issue. Our paper trail shows xx bank slowly piddling to nothing with bills and being closed with $10 being taken out. New account opened and starts being used.

5)I can't comprehend why you're even considering a short sale.

6) We were told not to pay the property taxes. They go with the house.

HTH

sorry bout the length but thanks for reading and responding!

1) i don't want to save the house at this point anymore....so why pay when i cant save it?? its about to go into foreclosure, i got a notice of intent to foreclose from the new mortgage lender...

2)i fell behind because at first, i was trying to keep up wit the mortgage since i was trying to save it....then i didn't even have enuf to keep current and then decided to file for chap 13, so i stopped paying....now, i don't want to save it and i'm so far behind i'm not sure if i can catch up wit everything else....i did a budget when i was planning to file for chap 13 and it turned out with everything, bills, credit cards, mortgage, personal expenses etc....i made 1200 less than all of it....and that was using minimum payments....so excluding my 1400 mortgage payment, i could have stayed current on credit cards but be living paycheck to paycheck....and of course, after meeting my attorney, he said stop paying so....and he didn't mention a timeline, i suppose i owe him a call...that and my mortgage company to ask them about a short sale...

3)ok, good to know.

4)ok good to know also

5) the only reason i'm thinking of doin a short sale at this point is to get the house out of my hands sooner rather than wait.....i just want to be able to file bk and get rid of the house as soon as possible to start rebuilding my credit and start fresh.....my credit was great up until i decided to break up with my ex and handle everything on my own....thats when things fell apart....i know i can wait til the house forecloses and live rent-free during that time but then i'm looking at that long timeline PLUS the length afterwards in re-building my credit....i ultimately wanna be able to be on at least good-standing again by the time i graduate from college (4yrs) because i'm planning to move out-of state afterwards....i kno bk will still be on my credit but at least i can start sooner rather than later, ya kno?

6)ok good to know also.

Thanks again!

[tcreegan]

Hi ab33arch,

1) told by the bk attorney back in june to stop paying on my credit cards since i'm going to file, Yes, absolutely

'm just afraid that once i get to court and they see i'm able to afford it plus they'll see my spending habits and the fact that i really haven't saved when i should have and then say no to me filing....is this a possibility???
No, you can do Ch7 or Ch 13 depending on your income and what is the median income for your area. Has nothing to do with your previous spending habits.

2)should i wait til the short sale goes thru before filing for bk?? and if so, shouldn't i pay the minimum on my credit cards?? No and No Don't do a short sale, no benefit to you or the lender. Only person who benefits is the real estate agent getting a commission.

3)til next year that I end up filing, do the creditors just wait to get a case number? or do they end up sending the accounts to a collection agency and continue to try and collect the debt?? Maybe and maybe Time to collection varies by company, but it won't matter anyhow, the collection agency just gets to be a creditor along with the cc company and the debt is discharged.

4) i want to switch banks but i'm afraid that it might look bad for the bk.....should i wait til after i file or does it matter?? doesn't matter, get a good bank

5) this is a short sale question.....i read that in NJ, they can come after you for the difference between what you owe and what the house sells for. i've also read that bankruptcy covers this. It is called a deficiency and yes BK covers it. BUT...don't bother w/ a short sale. It doesn't help you any, stay in the house, put the mortgage payments toward a new place to live. You probably have many months you have to move out.

6) no, no and don't The back taxes go with the house.

Hope this helps,

Tom in Colo

[justdidit]

My situation is somewhat like yours, but with a little bit of a twist. I'll keep it a bit shorter :P

In summer 2006 purchased a very lovely brand new property with my ex. A year later she decides that she wants to move on with her life and it didn't involve me any more. She pretty much dropped any financial obligations she had and moved on. In general I'm the type of person that doesn't like keeping any type of debt or money owed to someone. So if I get a bill and its a valid bill I pay it ASAP. I had no debt other than student loans, the car, and the mortgage.

So other than spending thousands of dollars paying off everything that she dumped and walked away from due to co-signing, taking on a mortgage that was acquired using two individuals income, and starting to amass various types of debt; there was the issue of the property which by that time had lost a considerable amount of value. I burnt myself out trying to keep various bills and the property from falling behind on its mortgage while trying to resolve the issue with my ex (conversations with which a wall would probably been more fruitful). On top of that I was working 2-3 jobs and going to school full time for my master's degree. I really had no life what so ever.

July of last year I literally couldn't do it anymore and burnt out. I tried for almost 2 years to work with the bank through short sale, potential quit-claiming the property, deed in lieu, workout, refinance, 3rd party help, etc...and I came to a dead end. I had very good potential buyers for the property (even in cash) but the bank takes so long in the decision for the short sale (6+ months) that potential buyers walk away. On top of that the bank would not forgive the deficit amount, but would also require another $10,000 on top of the deficit to be repaid from me to go through with the short sale. From my understanding, the deficit amount is also a debt that can be renewed every 12 years by the mortgage company so technically its a debt that can follow one till their later years (as explained by my lawyer).

A month ago I filed CH7 and had my 341 meeting this past Wed. I will no longer be responsible for the debt while my name is still on the deed until the property is foreclosed on. What happens next with the property; its her problem. She could file for bankruptcy, let the property go into foreclosure, pay it off, whatever. Taxes associated with the property stay with the property.

Reading through your post I did notice something in certain parts of your passage. It seems like you're worried about your ex in certain sections such as in #5 where you want to let him know what will happen to him. While you are tied to him through the property and/or any other financial means, make decisions that are in YOUR best interest through talking with your attorney. Then, let him know what you plan to do. When I finally accepted that bankruptcy was my last option and I had acquired a good lawyer, I sent an email to my ex and gave her a "Hi, I'm filing bankruptcy due to the situation. Good bye" type of message and that was it. The property has already begun the foreclosure process and I received a letter from the banks lawyer regarding the move toward foreclosure. So its just a matter of time now.

Also, a short sale is not a quick process. I tried it twice and each time it took 6+ months to get an answer. Even then, I was never forgiven the deficit and had to pay $10,000+ for the process.

If I knew what I know today, I would have saved thousands of dollars filing for bankruptcy years ago while saving myself a lot of stress.

[ab33arch]

Hi ab33arch,

2)should i wait til the short sale goes thru before filing for bk?? and if so, shouldn't i pay the minimum on my credit cards?? No and No Don't do a short sale, no benefit to you or the lender. Only person who benefits is the real estate agent getting a commission. i was hoping doing a short sale would get the house of my hands quicker... is this not the case??

5) this is a short sale question.....i read that in NJ, they can come after you for the difference between what you owe and what the house sells for. i've also read that bankruptcy covers this. It is called a deficiency and yes BK covers it. BUT...don't bother w/ a short sale. It doesn't help you any, stay in the house, put the mortgage payments toward a new place to live. You probably have many months you have to move out. Again, i was hoping doing a short sale would help speed up this whole thing and get the house off my hands....i don't want to be living rent free for 6 months or a year or however long it takes...while some people would find that crazy cuz its money i'd be saving up, i'd rather work on building my credit back up instead of waiting X amount of time for the foreclosure to go thru and THEN start building it back up....i know bankruptcy stays on your credit for awhile and you won't be able to apply for another mortgage for X amount of years...i want to shorten that amount of time by getting this all taken care of sooner rather than later... is that possible??

thanks Tom in Colo... i responded back to some of your comments in bold... thanks again!

[tcreegan]

Hi again, ab33arch,

i was hoping doing a short sale would get the house of my hands quicker... is this not the case?? unfortunately not the usual case. The fastest way is to sign the deed over to them, called a 'deed in lieu of foreclosure' Some folks have done this and got paid to leave the house ready for market, heard it called the 'cash for keys' program. A short sale can be quick, but in todays market that is not usually the case.

...i don't want to be living rent free for 6 months or a year or however long it takes...while some people would find that crazy cuz its money i'd be saving up, i'd rather work on building my credit back up instead of waiting X amount of time for the foreclosure to go thru and THEN start building it back up....i know bankruptcy stays on your credit for awhile and you won't be able to apply for another mortgage for X amount of years...i want to shorten that amount of time by getting this all taken care of sooner rather than later... is that possible??

Sort of but in a different way.....The BK trumps the subsequent foreclosure, you don't have both on your credit. So your rebuilding process begins with the BK discharge, the mortgage acct goes to a zero balance and notated IIB (included in BK) There shouldn't be anything past that. Heck, this is how all accts included in the BK should be noted.
BUT.....if you do a short sale before the BK, the negative notation from the short sale stays on your report (large charge-off) + the BK....double whammy.

Dont let concerns about your credit report influence what you do in the BK. In the BK, do whatever is in your best interest in the long run. All the things people talk about to save their credit score in a BK are like nickles & dimes, while the BK itself is the 800lb gorilla in the room no one talks about. The first step in rebuilding credit is to pull reports from the big 3 and start cleaning them up. Start challenging negative accts, negative notations, etc. Then start on some of the legit credit rebuilding activities found on other parts of the forum.

Most landlords do not report to the credit bureaus, so living in a rented place will only help if they report to the credit bureaus. So moving out probably won't help, and staying, accumulating a sizeable downpayment on a car, and getting a small loan that will get reported,...... probably much better option.

Hang in there,

Tom in Colo

[ab33arch]

i haven't talked to my lender yet but i heard most lenders require you to try and sell for a period of time before they'll do a deed in lieu...right??

The BK trumps the subsequent foreclosure, you don't have both on your credit. but the title remains in your name until the foreclosure process ends does it not?? so does the bk only get reported and foreclosure is just public record and not on ur credit???

So your rebuilding process begins with the BK discharge, the mortgage acct goes to a zero balance and notated IIB (included in BK) There shouldn't be anything past that. Heck, this is how all accts included in the BK should be noted.
BUT.....if you do a short sale before the BK, the negative notation from the short sale stays on your report (large charge-off) + the BK....double whammy. THANK YOU SOOOO MUCH FOR THIS! i think this is what i needed to hear...i felt like i kept going around in circles and wasn't getting anywhere with what i should do first....one question, am i obligated to tell my ex since he is on the mortgage as well and owns half the property? the bk will only discharge my half of the mortgage correct??

In the BK, do whatever is in your best interest in the long run. All the things people talk about to save their credit score in a BK are like nickles & dimes, while the BK itself is the 800lb gorilla in the room no one talks about. The first step in rebuilding credit is to pull reports from the big 3 and start cleaning them up. Start challenging negative accts, negative notations, etc. Then start on some of the legit credit rebuilding activities found on other parts of the forum. i already am going in thinking the bk will bring my score down to the bottom of the barrel and i'm okay with that...i just want to start fresh as soon as possible....i have student loans that wont get discharged and will still be on deferment after the bk because i still have 4 more yrs left so that will help my credit immediately after the discharge...

Most landlords do not report to the credit bureaus, so living in a rented place will only help if they report to the credit bureaus. So moving out probably won't help, and staying, accumulating a sizeable downpayment on a car, and getting a small loan that will get reported,...... probably much better option thanks for giving me perspective on this...i hadn't thought of it this way.... so if i file for bk asap, mortgage goes to zero, and technically i can still stay in the house rent free until they foreclose and save money and work on rebuilding my credit, correct? one question tho, since i'd still be on the title won't i be responsible for taxes, water & sewer, and the overall keep up of the property???


thanks soooooo much for your insight!!! you've really given me some reassurance and i think i have a better understanding and idea on what i'm going to do.... thanks!!!

[enuffznuff]

Just a clarification on your statement "the bk will only discharge my half of the mortgage, correct?"

This may be what you meant, but the bk doesn't discharge half the mortgage, it discharges ALL of YOUR responsibility to pay the mortgage, leaving your ex responsible for the WHOLE mortgage, not half.

[ab33arch]

Just a clarification on your statement "the bk will only discharge my half of the mortgage, correct?"

This may be what you meant, but the bk doesn't discharge half the mortgage, it discharges ALL of YOUR responsibility to pay the mortgage, leaving your ex responsible for the WHOLE mortgage, not half.

oh...okay thanks for that clarification...

[ab33arch]

Just a clarification on your statement "the bk will only discharge my half of the mortgage, correct?"

This may be what you meant, but the bk doesn't discharge half the mortgage, it discharges ALL of YOUR responsibility to pay the mortgage, leaving your ex responsible for the WHOLE mortgage, not half.

wait, i just started thinking of this more.... so in the beginning of this whole mess, if he had filed for bankruptcy himself and signed a quit claim deed over to me, it would've put the house solely in my name with him off the mortgage????

[nceguyfromne]

My situation is very similar to yours... owned a home with my ex for a short time, got divorced (in 2006), continued paying the mortgage for the next 16 months while my ex squatted there and I rented an apartment, finally stopped paying (after maxing out every credit card), foreclosure process began, and finally, sold the property in a short sale. Trust me, I have lots of regrets. 18 months and $150 extra dollars per month later (the amount the bank made me agree to pay each month until the short sale deficiency was paid off), I filed for Chapter 7 anyway. Add to that the $1000 I was paying every month in minimum payments on my credit cards, much of which was accrued as a direct result of taking on the mortgage. Looking back, I wish I could have separated the emotional aspects (wanting to preserve my credit and do the right thing) from the business aspects (I couldn't afford to pay the mortgage, was living off my credit cards to do so and was going to end up bankrupt as soon as my cards were maxed out). I could have moved on my life a whole lot sooner.

If you know you are going to file Chapter 7/13, you are creating a whole lot of completely unnecessary work for yourself by attempting a short sale. You will likely spend hours, if not days, filling out paperwork, and hours more on the phone bending over backwards to get the bank to accept your proposal. If they are anything like my lender, they will not even consider a short sale until you have a fully-executed purchase and sales agreement in hand, which will have to contain provisions that it is contingent upon bank acceptance. All the while, they will be continuing their foreclosure process against you. When and if you do get an offer on your house, they will scrutinize every penny of your closing costs and probably demand that the realtors accept a smaller commission, which is just one more potential for a breakdown in negotiations. And for what? To spare your lender the trouble of having to sell the property themselves?

You are also doing yourself a disservice by putting yourself in the position of having to move, pay rent, etc sooner than you otherwise would if you simply did nothing and focused on your bankruptcy. Remember that this is purely BUSINESS. Your creditors, including your mortgage lender, have absolutely no emotional stake in the outcome of your transactions with them and do not care in the least how long you remain in your home rent-free while they are trying to reclaim it in the foreclosure/bankruptcy process. When it is time to go, you will know for sure. In the meantime, it makes good sense to take advantage of whatever time you can buy to build a nestegg and prepare for the next steps in your life. There is no reason you have to emerge from your bankruptcy flat broke.

Best of luck!

[tcreegan]

hello Ab33arch,

The BK trumps the subsequent foreclosure, you don't have both on your credit. but the title remains in your name until the foreclosure process ends does it not?? Yes, the process doesn't end until your name is off the deed, and this is why it is important for having liability insurance. BUT.. your credit score reports should not have the foreclosure on them as it was not your debt going through foreclosure. You write to the big 3 and request the foreclosure gets removed, when they say NO (automatic response) send more letters, repeat until you credit report is as good as you are going to get it. Also if you don't pay the taxes, they become a lien on the house the next buyer has to deal with.

one question, am i obligated to tell my ex since he is on the mortgage as well and owns half the property? the bk will only discharge my half of the mortgage correct??
You need to inform him or he could cause lots of problems later on, reopen the case, a mess. He has a legal right for a chance to protect his property interests.

since i'd still be on the title won't i be responsible for taxes, water & sewer, and the overall keep up of the property??? Yup, you get those chores until your name is off the deed, mentioned liability insurance already. Keep recpts for all this, might be something you can get out of the sale money or be deductible on taxes somewhere.

Hope this helps somehow,

Tom in Colo

ps: did I tell you to ask about a 'cash for keys' program from your lender?

[ab33arch]

ps: did I tell you to ask about a 'cash for keys' program from your lender?

Hi Tom in Colo....your advice is a big help thanks!

is that the same as deed in lieu?? or short sale?? if not whats the difference between the three?

thanks again!

[ccsjoe]

Hi Tom in Colo....your advice is a big help thanks!

is that the same as deed in lieu?? or short sale?? if not whats the difference between the three?

thanks again!

Hi Ab33arch,

Deed in Lieu is where you and the bank agree to allow you to deed the house to the bank instead of the bank following a foreclosure process; you both must agree to it.

Short sale is where you AND the bank agree to sell the house to a third party for less than it's value.

Cash for Keys (C4K) is where the bank pays you to surrender the house without destroying it. This happens after change of title. On my name, click the 1 blog entry I have on this site to read about my experience and the mechanics of C4K.