Why are people still paying mortgages on non-reaffirmed mortgages?... And others.

[cofer22]

I must be spending too much time on this forum, because I'm suddenly confused about some things I've been reading.

Over in the Forclosure threads I've been searching for information to help me decide on whether to default now to hopefully speed up the foreclosure process after filing. If that would even work.

What I've learned is that after discharge, the debtor; while relieved of the debt and service of the debt; is still the owner of the property until ownership changes. Right?

With this in mind people are using a numerous strategies for getting thier names off the property: Short Sales, DIL, and allowing to fall into foreclosure.

Things I'm confused about are:

1. If you don't reaffirm mortgages, then when your property is finally sold or title is transfered, can this be reported negatively on your CR? It seems like some people say no, and others have experienced negative reporting. That's against BK law right?

2. Why do people continue to pay mortgages after a discharge on a NON-Reaffirmed mortgage? Do you have to keep paying to stay in your property? Can you continue to stay virtually rent free until the home/condo is sold?

3. Does it matter to be current on payments? Is it easier to get a bank to work with you POST discharge if you've been current. Ironically, to qualify for a short sell, I've been advised to default.

4. Finally, I've really got to come up with a strategy for dealing with my tenants. How did you all with rentals deal with them. They've been really good tenants. I don't want to screw them over in any way.

These are the questions I can think of right now. It's much easier to plan when you've got some guidance.

Thanks
Jeff

[shark66]

People do have to pay to be able to stay in homes after the discharge, otherwise the lender would foreclose.

If you default on payments, the same will happen.

There's really not much to "work" on once the debt is discharged without re-affirmation in Ch. 7 unless you have a second or third mortgage and are intent on offering them a small percentage of what was originally owed to release the lien.

That's all I have, no doubt that the others will chime in.

Good luck.

[chicagoannie]

Kudos to you, Jeff, for caring about your renters. After my divorce I rented a beautiful home and signed a 3 year lease. A hear and a half into it, I started getting "save your home from foreclosure" type junk mail, addressed to "homeowner"...then the unpaid property tax notice tacked to my front door...then a realtor friend told me the home was in foreclosure. A public records search produced my landlord's bankruptcy filing. It was not a fun situation for me and my kids.

[AngelinaCatHub]

Welcome Jeff. It is confusing to me as you are going C7, yet you 'own' rental property. Mostly, those who do not reaffirm yet wish to keep their home, for any several reasons, will "pay through". On rental property, unless they are self paying, you have an asset and it could be attached. As you may know, once you file, all you own belongs to your estate and the Trustee 'owns' it.

In the event you let go of your rental property, usually the bank will allow the renters to stay on and pay the bank. The bank does not want the property they want the money. So, the good thing about paying through rather than reaffirm, is that if things get worse and you cannot pay, you will not be sued for leaving the property.

In a reaffirm, you MUST stay up to date on the payments or you could be 'forced' to leave and a repo. A reaffirm must be approved by your Trustee and/or the Court. If the Court deems you cannot afford it, you will not be able to reaffirm. I hope that helps clarify stuff. 'Hub

[tcreegan]

Hi cofer,

reported negatively on your CR?...That's against BK law right? ....not BK law, it would be the Fair Debt Reporting Practices Act. But there is nothing that says they can't report a foreclosure or any other public record item, negative or not. But there is also nothing that says they can't take it off. Start a letter campaign, they will say "no" automatically on the first try, be persistent.

People pay on non-reaffirmed mortgages b/c they plan to keep the house. "Pay and Stay" If you don't plan to stay, you "Stay, Don't Pay" ...basically live payment-free until you get kicked out in the foreclosure.

If you are doing "pay and stay" being current is a big deal. Generally speaking, the discharge gives you some leverage when working with the lender. Another strategy besides DIL, short sale, foreclosure is to find a local investor who will buy the mortgage note. Not the property, just the note. Ask around the realtor crowd or look for "owner financed" "no bank" "we buy homes" signs.

And lastly, thank you for caring about your tenants!!

Tom in Colo

[keepmine]

4. Finally, I've really got to come up with a strategy for dealing with my tenants. How did you all with rentals deal with them. They've been really good tenants. I don't want to screw them over in any way.

The best thing you can do is give them plenty of warning about your filing and the eventual foreclosure. Things like foreclosure and eviction don't happen overnight so they shouldn't be under a lot of pressure to find a place to live immediately.

[cofer22]

Welcome Jeff. It is confusing to me as you are going C7, yet you 'own' rental property.

All properties are severely underwater. 2 Rentals in a Recourse state (Colorado). Cutting losses and moving forward. Going to pursue a Non-Consumer BK7.

I decided that I'm going to inform my tenants about our situation. Default, try for DIL, likely foreclosure, BK. I'm going to have them not pay me rent for the future till the bank contacts them about paying. They are protected to a degree if they have a lease signed. Usually 90 days after new owner takes property. They should be able to save some $$$. Good for them...
We decided that this month is it. Starting to default. Let the games begin...

Thanks to all for the great information. This site is really great..

Jeff