Underwater $15K on our mortgage-what is the best way to proceed with CH7?

[Diesel73L]

We're underwater on our mortgage, but not the point where some folks are (ie: a $500,000 mortgage on a home now worth $200,000), so we don't want to walk away, but from what I've read we don't want to reaffirm and keep paying the same payment post BK either. What is the best course of action? Our principal and interest is $1460/mo which is reasonable, but since this is NJ, property taxes are killing us at $800 a month for a total monthly payment of $2260. What are our options for lowering our mortgage payment during the BK?

[murphsmom]

You say you're underwater, but are you actually behind on payments? We were 3 months behind on payments, which then made the bank understand that we very seriously were looking at a foreclosure situation in the near future. Therefore, they agreed to modify our mortgage with Obama's plan, due to our drastic change in income from the time we purchased the home and now. Mod just went through May 1st, and we filed bk7 on May 31st. Our attorney actually said to go ahead and reaffirm the mortgage, since it's only our 1st and we don't have any 2nds or 3rds, he said "they'd never go after you for a first".

If I were you, I'd start with the bank, and try to get the loan modified, UNLESS the decrease in mortgage payment would make you not pass the means test or something. We shaved $600 per month off our mortgage payment with the mod, and we STILL were under the means test. Geesh, what's that tell ya?

Good luck

[Diesel73L]

You say you're underwater, but are you actually behind on payments? We were 3 months behind on payments, which then made the bank understand that we very seriously were looking at a foreclosure situation in the near future. Therefore, they agreed to modify our mortgage with Obama's plan, due to our drastic change in income from the time we purchased the home and now. Mod just went through May 1st, and we filed bk7 on May 31st. Our attorney actually said to go ahead and reaffirm the mortgage, since it's only our 1st and we don't have any 2nds or 3rds, he said "they'd never go after you for a first".

If I were you, I'd start with the bank, and try to get the loan modified, UNLESS the decrease in mortgage payment would make you not pass the means test or something. We shaved $600 per month off our mortgage payment with the mod, and we STILL were under the means test. Geesh, what's that tell ya?

Good luck

Sorry I should have been more clear-we're not behind, but right now we owe about $230K and the house is worth about $215K. We don't pass the means test now, but will have no problem passing it once my wife goes on unemployment-by defaulting on the credit cards we'll be able to make the mortgage payment going into filing. What I'm hoping for is that post filing we'll be able to get a lower payment, I'm just not sure how that would work or if it can. Once we are discharged a lower payment would do a lot to help us not get back into the situation we're currently in.

[ValleYum]

You say you're underwater, but are you actually behind on payments? We were 3 months behind on payments, which then made the bank understand that we very seriously were looking at a foreclosure situation in the near future. Therefore, they agreed to modify our mortgage with Obama's plan, due to our drastic change in income from the time we purchased the home and now. Mod just went through May 1st, and we filed bk7 on May 31st. Our attorney actually said to go ahead and reaffirm the mortgage, since it's only our 1st and we don't have any 2nds or 3rds, he said "they'd never go after you for a first".

If I were you, I'd start with the bank, and try to get the loan modified, UNLESS the decrease in mortgage payment would make you not pass the means test or something. We shaved $600 per month off our mortgage payment with the mod, and we STILL were under the means test. Geesh, what's that tell ya?

Good luck

@ Murphsmom

Congrats on the loan mod!! Yay! But are you REALLY gonna reaffirm your mortgage? You can still just pay your modified payment without reaffirming the debt and they will not come after you for the house. The mortgage company will happily take your timely payments and give you the deed when you pay the note in full.

God forbid any of this but: What if you die or can't work ever again? What if your spouse dies or is disabled? What if you lost your job and could not find another for 3 years? Life can turn on a dime, sometimes.

If you lost your house to foreclosure AFTER a reaffirmation, I believe NY is a recourse state which means your mortgage company could sue you for the difference in what you owe per your reaffirmed note and what the house sold for at a foreclosure auction.

If you just "stayed and paid" and any of the above scenarios happened, you would be able to walk away from the debt because it was discharged in bankruptcy.

What you checked on your SOI on your bankruptcy petition would be true, because when you filed it you intended to reaffirm, but PLEASE reconsider this decision.

PLEASE read this thread here (started by a fabulous attorney here on the BK Forum board): http://www.bkforum.com/showthread.ph...ht=reaffirming

And a very recent post by a forum member: http://www.bkforum.com/showthread.ph...ht=reaffirming

I am not judging your attorney or preaching (much LOL!) to you - I just don't want to see anyone make an unrecoverable error.

[murphsmom]

Hi, I will speak with the attorney in depth about the reaffirmation and his take on things. I've read the threads and understand the risk, and we may try to just pay and stay, that would make me MUCH more comfortable. Especially since they tacked on a $36k balloon payment at the end of our term, making us underwater at this point. But still happy to have a roof over our heads, since we'd never qualify for anything else at this point and have two kids.

To the OP: We considered many options, but realized that there would be NO way to reduce our payment AFTER filing Ch 7 because we'd never qualify for a refinance based on our now poor credit scores. Maybe you could try a refi now, get that all situated, and then file?

[747LUVR]

we managed to get a perm mod prior to bk. last year after my wife was suddenly hospitalised, and i missed a month of work to look after her and the baby, our lienholder finally said ok....albeight several months after we made a request for a mod. so we managed to go from almost $1800/mo to an even 1k, a huge relief. that was all done and said in mid december, and about a month later we pulled the trigger on our ch 7....didnt re affirm or anything, and we got a letter after discharge from the lien holder, stating 'you're under no obligation to repay you note, however, if you'd like to....' (which we are).

[murphsmom]

747, our bank initially said NO to a modificiation, until we missed the three payments and they knew we were seriously looking at foreclosure if they didn't help. Funny how quickly banks are willing to help once you miss payments, but not before that.

[ValleYum]

Hi, I will speak with the attorney in depth about the reaffirmation and his take on things. I've read the threads and understand the risk, and we may try to just pay and stay, that would make me MUCH more comfortable. Especially since they tacked on a $36k balloon payment at the end of our term, making us underwater at this point. But still happy to have a roof over our heads, since we'd never qualify for anything else at this point and have two kids.

To the OP: We considered many options, but realized that there would be NO way to reduce our payment AFTER filing Ch 7 because we'd never qualify for a refinance based on our now poor credit scores. Maybe you could try a refi now, get that all situated, and then file?

I am glad you will talk it over again with your lawyer.

If you had asked me a couple of years ago if I would be out of work due to the aftereffects of an accident and looking at filing for disability on advice of my physician - I would have laughed at you. I wouldn't laugh today. It was a cat running through my feet at the top of our staircase, falling down 13 steps and no AFLAC or disability policy. Life does turn on that dime.

Take good care, murphsmom.