Chapter 7 and Keeping Residence

[skibum]

Is it possible to structure a BK under Ch7 and keep your home? Our Ch7 is up for discharge any time. I may be getting a job and am thinking is it better to try to keep my old home, or should I just rent a newer, cheaper one? Can I even try to keep my old home? It's not in foreclosure as of this moment.

I am an accountant and wish that there was some reference source or material for planning these things out. My attorney did absolutely no planning with us at all, and is now refusing to answer my questions. Very frustrating. I just have a feeling that there is a better way to do what I'm doing than the way I'm doing it, if that makes any sense.

[tez44xx]

Are you upside down on the house? Can you afford the house? Those are the question you need to ask yourself. If you are paying for a house that is worth a lot less than your current loan value than you have to make the call is it worth it.

[keepsmiling]

Many people keep their homes in a 7.
Since your discharge is close, you should have a pretty good idea what's going on at this point.
What is your equity? Was the home "abandoned" by the trustee? What did you tell them you planned to do on your filing and at what was discussed at the 341? We need a little more info to help.

As to the rest of your post- that's why this forum is so amazingly helpful. It often seems to be that they atty's give info strictly on a "need to know" basis, and often, not even then. Someone here was recently asking for hints as to what topics to cover in his upcoming book on BK; and yes, the PLANNING was the biggie. However, it's hard to pin down because it varies so much by district and trustee. Some are "greedier" than others.

Good luck and keep posting.

[LadyInTheRed]

If you are current and stay current on your mortgage you can keep your home. Whether you should keep it is a different question. With answers to the questions already posted, you will get opinions on whether you should.

[skibum]

The house is underwater. First lien of 630K, second of 100K, value hard to determine it's a resort area and comps are hard to find, not lot and block, all custom homes, etc. The current assessed value came in last week around 590K, and it's too early to tell if that is a high or low value. Properties were selling for 80% of assessed value a year ago, but assessments this year dropped almost 30% from then. I have a mortgage broker license and I can't even tell any more what properties are worth, there is no logic in the market any more. What I think and what I see aren't even remotely connected. AVM's are useless, and appraisers are all over the place with values disparate by over 50% in some cases. I would "guess" value is around $500K or less, but again I have no idea. Pathetic. I am no longer active in the mortgage business, I was an "honest" broker and never did a Countrywide deal, btw. That's probably why I'm broke. I did care if people could afford to make the payments, so I lost a lot of business and real estate agents hated me because I cared more about the customer than the money.

Our Ch7 was no asset, and I can't recall even discussing the home at the 341 meeting. No estate was opened. Our intent at the time was to abandon the home, but I am not clear on how or if that was communicated to the trustee.

We haven't made payments on the house since September, it would cost over $30K to get current.

I tried to do my own loan mod, but was declined by Chase for purely frivolous reasons, it was a complete run around and was never given serious consideration by the bank. Again, as a broker and accountant I knew when I was getting BS'd.

After learning more here about the BK process, I wondered why we didn't file Ch 13, strip the second lien and try to reduce the first. Is it too late to try to do that, with the discharge of the 7 so close? If the second was stripped and the first reduced, say to 530K, I think I could be happy with that, I think. If the first went to 417K I would be even happier.

I feel so stupid and ignorant, it's so hard to get straight answers in this "art form" known as BK. Thank you everyone for your help. In a perfect world, I would like to stay in the house and make payments based on the actual value of the home. That's probably the accountant in me talking, not very realistic I guess.

[LadyInTheRed]

After learning more here about the BK process, I wondered why we didn't file Ch 13, strip the second lien and try to reduce the first. Is it too late to try to do that, with the discharge of the 7 so close? If the second was stripped and the first reduced, say to 530K, I think I could be happy with that, I think. If the first went to 417K I would be even happier.

I don't know whether you can convert to a 13 at this point. If you can, you can't reduce the balance of the 1st mortgage. Sounds like you could strip the 2nd though if you think it's worth it. But, keep in mind that doing a 13 if you qualify for a 7 means you will probably have a difficult time in the Chap 13, especially if it includes mortgage arrears. Also, in a Chap 13, your 1st mortgage won't be discharged. So, if you change your mind about keeping the house or just realize you are unable to, you will still have personal liability for a deficiency if it is a recourse loan.

If your 1st and 2nd are with different banks and you are current on your first or can cure your default quickly, you could keep paying on your first and try to negotiate with the 2nd. They aren't going to foreclose while the house is underwater unless they also own the 1st.

Also, if you are late on your 1st and can't catch up before discharge and the 1st starts foreclosure proceedings, you could file a 13 to give you time to catch up on the arrears. You probably can't strip the 2nd that way, but there is some controversy about that. Try searching "Chapter 20" (7+13=20) for more info.

Before you seriously consider any of these options, decide if it is worth continuing to pay even on the first on an underwater home. The accountant in you should be able to answer that. One thing to consider: Can you rent for less than you are paying on the first?

[keepmine]

Honestly, since it'll take $30K to just get current I'd let it go. No sense getting commited to a home underwater by 6 figures.
Stay there as long as humanly possible and save as much money as you can. When the foreclosure/eviction process is complete move to something you can afford.

[skibum]

Thanks Lady. The personal liability for a deficiency is a very scary thought, thanks for pointing that out. I remember the sticky about why reaffirming a mortgage is a bad idea. Is it correct, then, that if one files for 13 and it fails they cannot then file 7 later to have the mortgage discharged? I am just trying to understand.

It sounds like my idea of keeping the house with a renegotiated mortgage is not realistic. I received a Notice of Intent to accelerate last week, not sure what the meaning of that is, either, based on the different outcomes I read about here with others getting similar notices.

I know I am beating a dead horse, and it makes no sense to pay for a worthless asset. I just have a really hard time accepting the fact that quitting is winning in this case. I want to keep fighting and I need to stop.

[skibum]

Keepmine: our attorney told us to get out quick, so we left the home in December and have been paying rent since. We didn't even file until January, because he screwed up the timing on the means test. I could have stayed rent free. Talk about pain...that really hurts.

[skibum]

I have a couple more questions I hope you all can help me answer. When my 7 is discharged, is it correct that I have no further liability for either the first or second lien, including the "costs" of foreclosure? I am wondering if there is any way, after discharge, to try to negotiate with Chase to get a modified first that makes sense and keep the home? The NOI letter seemed to be begging me to contact them for help, but I have a feeling that is purely window dressing. Thanks.

[btbeme]

Skibum - walk away. The very best you can do at this point is to wait for your discharge, find a nice rental, and negotiate a "cash for keys" from Chase. They have a pilot program that will go as high as $20k for you to leave gracefully.

There is no such thing as a remod that will help you, really. What you need is a principal reduction, and while I have heard stories of their existence I have never seen one. To quote a Chase mortgage specialist here in Phx, whose task it is to save my house, "You have a Get Out of Jail Free card. I suggest you use it."

You have no personal liability on the first or second. A Deed in Lieu, with a payout from the bank (cash for keys) is your best bet. But get your ducks lined up first. While you THINK you have a better position to negotiate with Chase post-discharge, the truth is that the banks generally receive a better deal by foreclosing and getting a reimbursement from the Feds. True. Sad, but true.

I speak from experience...Chase, under water by $200k+ on the first, second w/ BofA, 10 months no payment, and so far no NOD. Chase, by the way, gave me a loan mod based only on income but would NOT discuss what the end loan would look like unless I made three trial payments. So far, I have banked nearly $28k by writing my "mortgage" checks to myself. I have a rental lined up, will save a huge amount every month, and will have close to $100k cash when and if it is time to buy again. Only question left to answer is whether Chase will pay me to leave.

[LadyInTheRed]

Thanks Lady. The personal liability for a deficiency is a very scary thought, thanks for pointing that out. I remember the sticky about why reaffirming a mortgage is a bad idea. Is it correct, then, that if one files for 13 and it fails they cannot then file 7 later to have the mortgage discharged? I am just trying to understand.

If your 13 is dismissed, you can file a 7, but in some instance you have to wait 180 days. It depends on the reason for dismissal. More info is at http://www.nolo.com/legal-encycloped...ity-29701.html.

If you file a 13, strip the second and get a discharge in the 13, you can't file a 7 for 6 years.

I just have a really hard time accepting the fact that quitting is winning in this case. I want to keep fighting and I need to stop.

Sounds like you know what you should do. No point in putting good money after bad. You can buy another house later.

[skibum]

Thanks folks. I am intrigued by the "cash for keys" deal, need to research that. That would be a very viable solution. I understand the banks make money on the foreclosure and they have no incentive to negotiate under the current system, which is a complete failure from our point of view.

I am not sure I want to buy another house again, lol. I have owned a bunch of them, and when I look back I could have rented several times and saved myself a lot of money and grief, but I also made a few bucks, too. I realized not long ago that I was motivated to buy a house more for the income tax savings than actual "ownership" issues and renting would have been a better option.

[StartinOver]

I hear you on the thoughts of whether you want to ever own a home again, skibum. I wanted to own my home because I have a serious case of HGTV-itis, which compels me to do stuff to my home. Remodel this and than, renovate the other, repaint, paper and carpet, etc., etc. It is either not permitted or a waste of money to do that kind of thing in a rental. We had a good time working on our house and made it truly wonderful. Which is largely now the beginning of our undoing, as we used home equity and credit cards to fund this compulsive habit, and the the bubbles burst and we lost jobs, and the equity drained out of the house til we were tens of thousands upside down and now soon it will be all over.

And I will never owe anyone one red cent again for anything , ever. I am unlearning the habit of applying the Burger King jingle to everything in my life... "o/~ have it your way, have it your way, have it your way, at Burger King, NOW! o/~"

I don't have to have everything my way. I don't have to live like a consumer.