Question on Chapter 7 and keeping the home

[ld2366eh]

We are behind on our mortgage payments, but would like to keep our home if possible. We originally thought we would have to file for C13, but with the arrearages, we've been told we are able to file C7. My question, can we file a C7 with our mortgage behind with the intention of trying to get a loan modification after the discharge? We would prefer to keep our home, but will consider foreclosure if we can't get the modification. How does that process work? I don't want to "surrender" the home unless we need to.

[LadyInTheRed]

There is nothing that prohibits you from filing a Chap 7 when you owe mortgage arrears. But, if you are in default on the mortgage, the lender can petition the court for a relief from automatic stay so that they can proceed with foreclosure. In the current housing market, they are more likely to wait until your Chap 7 is discharged before proceeding with foreclosure. You can still do a loan modification after a Chap 7 discharge.

Whatever you do, don't reafirm the mortgage in your Chap 7. You may need to indicate on your BK petition that you intend to surrender the home, but that doesn't mean you can't "stay and pay" if you and the lender can agree on a modification or some other way to bring your payments current.

[ld2366eh]

Thank you! That was very helpful! We are hoping for a modification after the discharge, but if that's not possible, will consider walking away. It's been a tough pill to swallow, but we are underwater on our mortgage and filing BK is supposed to be a fresh start! I need to keep that in mind every time I contemplate trying to stay in this house with the current loan structure. We will be able to afford the home after the BK, but just barely once it adjusts in a couple of years. Just doesn't seem worth it when I factor all of that in.

Let me ask this. IF we were turned down for a modification after the discharge, and chose to bring the loan current (without reaffirmation) before the house foreclosed, THEN stopped paying on the mortgage after the payment adjusts in 2 years, does our timeline till foreclosure reset, or can they foreclose the second a payment becomes late? Just thinking out loud...

[btbeme]

Let me ask this. IF we were turned down for a modification after the discharge, and chose to bring the loan current (without reaffirmation) before the house foreclosed, THEN stopped paying on the mortgage after the payment adjusts in 2 years, does our timeline till foreclosure reset, or can they foreclose the second a payment becomes late? Just thinking out loud...

In most states the foreclosure clock would reset once the payments were brought current, but check with your state. A few states used to allow foreclosure if X payments in Y months were missed, but I am unsure if that still applies anymore. many states have revised their foreclosure process in the last 5-6 years.

[tobee43]

In most states the foreclosure clock would reset once the payments were brought current, but check with your state. A few states used to allow foreclosure if X payments in Y months were missed, but I am unsure if that still applies anymore. many states have revised their foreclosure process in the last 5-6 years.

it wouldn't be surprising if the states revise them monthly now a days!

[btbeme]

it wouldn't be surprising if the states revise them monthly now a days!

Yup.

One additional thought for the OP - getting current, then waiting two years to fold up tents means that the clock for getting a new mortgage will reset - to three years - upon the foreclosure. The sooner the foreclosure (or short sale, etc) the sooner you get eligible for a new mortgage - should you ever want to venture down that road again. And, while I don't see a strong housing recovery in the next year or two; I cannot say that 5-6 years from now (2 years+ foreclosure time + 3 years to become eligible).

[ld2366eh]

I know. It was just a thought. After I wrote it I thought about all of those things! BK two years. Foreclosure 3. Should run concurrent.

[tobee43]

Yup.

One additional thought for the OP - getting current, then waiting two years to fold up tents means that the clock for getting a new mortgage will reset - to three years - upon the foreclosure. The sooner the foreclosure (or short sale, etc) the sooner you get eligible for a new mortgage - should you ever want to venture down that road again. And, while I don't see a strong housing recovery in the next year or two; I cannot say that 5-6 years from now (2 years+ foreclosure time + 3 years to become eligible).

it's certainly confusing. the bottom line here, is i do think the lenders are going to have to do something as it's going to get to the point that one in two persons have either bad credit, lack of income, a foreclosure, a bk or something to tarnish their ability to get a mortgage. i mean it's crazy!

especially, in light of our own situation being that in over 4 years no foreclosure process even started (other than a summons issued years back but the bank never carry through), our bk is discharged and closed. the statue of limitation for a deed transfer in this case being 20 years, well, that would mean since our names are still on that deed we would never qualify for a mortgage again.

i chuckled to myself .... keep our house after bk? NO...LOL!! PLeASE take mine!! i also suppose this meant we could have been living there almost 5 years rent free. or as hub suggested a year or so back go rent it out! then see what the banks do.

[ld2366eh]

Update - talked to my attorney the other day and he feels we will be in an excellent position for a loan mod after we file the bankruptcy. He also said something else and I want to make sure I understand this correctly. He said that the modification may not be everything I want it to be, but if it doesn't end up working out, I can default on the mod and the timeline will reset to zero. And then I could start another foreclosure defense and get a better modification down the road. This wouldn't impact my credit, correct, since I wouldn't have reaffirmed? He also said that further down the road, I could take all that money I saved and buy another house as long as I'm still current on this one. Something along the lines of "as long as you are current, there wouldn't be a "lis pendens" filed against you. I assume he means I would have to qualify for both mortgages even though the current one wouldn't be reporting to the credit bureaus? Does this sound feasible? I guess I would then rent out my current house until the market came back enough to sell it to break even. Sounds pretty complicated, but I do want to get out of this house at some point...

[btbeme]

He said that the modification may not be everything I want it to be, but if it doesn't end up working out, I can default on the mod and the timeline will reset to zero.

Most mods are that way - a bad deal for most people. But, your mileage may vary. As for the timeline reset - never heard of that. In fact, the clock for foreclosure will keep ticking throughout the mod process, though it is unlikely the bank would foreclose during a mod application process. The only "reset" I know of occurs when you get current on payments.

And then I could start another foreclosure defense and get a better modification down the road.

What would a "better" modification look like? If you are hoping for a reduction in principle, those are as common as unicorns. Well, maybe slightly more common than unicorns but less common than photos of Bigfoot.

This wouldn't impact my credit, correct, since I wouldn't have reaffirmed? He also said that further down the road, I could take all that money I saved and buy another house as long as I'm still current on this one. Something along the lines of "as long as you are current, there wouldn't be a "lis pendens" filed against you. I assume he means I would have to qualify for both mortgages even though the current one wouldn't be reporting to the credit bureaus? Does this sound feasible? I guess I would then rent out my current house until the market came back enough to sell it to break even. Sounds pretty complicated, but I do want to get out of this house at some point...[

Banks are not obligated to lend money to anyone they feel is a poor risk. Getting your finances in order after a BK - including the housing situation - is the best way to get a future loan. The plan you outlined above is a pretty risky one, full of "maybes" and a lot of hoops. Perhaps it would just be easier to hit the reset button, wait your two or three years post-BK or foreclosure, and start again.

[drowning123]

Whatever you do, don't reafirm the mortgage in your Chap 7. You may need to indicate on your BK petition that you intend to surrender the home, but that doesn't mean you can't "stay and pay" if you and the lender can agree on a modification or some other way to bring your payments current.

This is exactly what I did.

[ld2366eh]

Most mods are that way - a bad deal for most people. But, your mileage may vary. As for the timeline reset - never heard of that. In fact, the clock for foreclosure will keep ticking throughout the mod process, though it is unlikely the bank would foreclose during a mod application process. The only "reset" I know of occurs when you get current on payments.

Right. He said that I could accept a crap mod, get through the trial to bring my loan "current", then down the road after the payments are brought current, stop paying again...



What would a "better" modification look like? If you are hoping for a reduction in principle, those are as common as unicorns. Well, maybe slightly more common than unicorns but less common than photos of Bigfoot.

Maybe? He also said he's been seeing a bunch of principal reductions go through over the past 6 months or so - more than he'd ever seen in the past.



Banks are not obligated to lend money to anyone they feel is a poor risk. Getting your finances in order after a BK - including the housing situation - is the best way to get a future loan. The plan you outlined above is a pretty risky one, full of "maybes" and a lot of hoops. Perhaps it would just be easier to hit the reset button, wait your two or three years post-BK or foreclosure, and start again.

You are totally right and I agree 100%. The BK is the only thing that is certain at this point. We are keeping the house for now and trying for a mod. We'll see what happens from there. I am willing to walk away if necessary, either now or down the road. I certainly don't want this to drag on forever. But I will live rent free for as long as I can manage it. I don't want to sound bitter, but if they would have given me a modification one of the first 4 times I tried for one, perhaps I wouldn't be in this mess!

[ld2366eh]

Absolutely! My lawyer already said that too... Thanks!!!