Foreclosure or Bankruptcy

[kjuarbe]

Hi everyone. Just found this forum and have gotten a lot of information so far, but its still so mind blowing.

So...here is my situation.

I have a Condo which i bought and used to live in until i got married and moved in with my husband. Bought the condo in early 2007 and moved in with my husband in late 2007. I have been able to rent the condo off and on, but never at the monthly payments i owe.

I have been a year with out a job due to starting our own business and doing freelance photography. With my husbands income we have been able to pay all our debt, but in december, his company fell victim to the economy and he was pushed back to part-time (better than laid off as other co-workers).

Now with half the income, we cannot afford to pay the condo. So we have been considering going on foreclosure. Its not our homestead so im not in a need to keep the place.

I spoke with a lawyer today who advised bankruptcy, chapter 7. The reason he advised BK was because he said there is a chance of deficiency and taxes.
But BK just seems extreme especially since i only have $2,000 in credit card debt and thats it. So the only thing that we cant afford to pay is the condo.

My main concern and the reason why i would consider BK is the fear of Deficiency. I bought the condo for $147K and a similar unit just sold for $40K. We cannot afford to pay the condo and neither could we afford to pay the difference.

So i wanted to ask here what you guys think is the better option. I have no other assets other than a used 98 Escort. My name is not on the house i live in with my husband, and we dont have any assets together. I am also not afraid of my credit score because i wont be needing credit for a long time. My main concern is the Deficiency.

Any help and advice is greatly appreciated.'

Thanks,
Kristina

[kjuarbe]

Hi, just to add more info.

My husband is not on the mortgage. We do not own the house we live in now, my husbands parents own the home and we rent it.

Also i have been current with all my debt up till now. April will be our first month of not being able to pay the condo.


Thanks

[AfraidOfBK]

Sounds to me like you could file BK alone (as long as yo have no other joint accts? PErhaps you might consider removing his name from anything you have together, and plan a BK (this could be discussed with a bk attorney re: timing)

Then if you waited the necessary time after separating all of your accts, and stop paying your condo pmts for a while until you file?

We started off thinking a loan mod was the answer, then we decided just to walk away, then we thought, "Why not meet with an attorney just to see our options"

Now we are planning to file BK ch 7 in June or July....just make sure if you plan to file, you plan properly and do not continue charging on the cc's or making large transfers of money...just so you dont risk your case being dismissed...also you could slowly move all of your money into husband's accounts so that you already look bankrupt and do not have to worry about losing any of your assets ($ in bank). AGAIN - talk about planning, you might have to wait at least 6 months to file (but could probably stop making pmts sooner)

I talked to two lawyers who said I HAVE to file BK just for the simple reason of avoiding deficiency.....but then again, I know several people who have foreclosed and no one has gone after the deficiency judgement (YET)....

you MIGHT however, have to pay taxes on the deficiency since you might not be exempt under the new legislation (Mortgage Debt Forgiveness Act or something) that protected homeowners against paying taxes on the deficiency...

this only works if its your primary residence (and is valid for foreclosure deficiencies from 2007 - 2012) and from what I understand, your condo is NOT primary residence, so you would still have to owe taxes on the difference?

Hope this helps, this is just my experience with it all and i am new at this too

[kjuarbe]

HI! Thank you so much for the reply & help! I really appreciate it! I'm just freaking out and am so nervous! I just want to get as much information as I can, you know. Anyways, yes, the condo is not my primary home; I just rent it when ever I can. We only have a bank acc together, but all we have is $19.00 we don't use it, so I can go ahead and close it. What did you refer to as not have the case dismissed? Can that happen? Can anybody qualify for BK7?

THANK YOU SO MUCH! for your help! It definitely help to talk to other people

[Gerry]

If my loan mod doesn't go through with Countrywide, I'm going to need a place to rent. Any chance it's in Central NY?

(I'm kidding, of course - I do hope you figure out the best solution, and you've certainly come to right place for sound advice)

[AfraidOfBK]

you can only qualify for ch 7 if you pass the "means test" i know there are links on here re: going to a website and seeing if you qualify (i just asked my lawyer).....AND I would strongly suggest meeting with a lawyer for a free consult now so you can start planning.

"Dismissed" means that your B can be dismissed (not accepted) which stinks, because i think it stills tays on credit report anyway? But if they think you have done something fraudulent they could call it "presumption of abuse" and dismiss the case, so meet with lawyer *now* so that you know what to do and what NOT to do in the months before you file....

[StartingOver08]

Yep, dismissed is the worst of all worlds. You have the BK on your credit AND you have all the creditors coming after you like mad because they know the BK court is not there to protect you.

It would be better to be in a 13 than dismissed!

[kjuarbe]

Hii, Thanks for the replies everyone.

Yes i spoke with a lawyer, he's who suggested bankruptcy so avoid a deficiency and taxes.

As far as the means test go, I have been un-employed for a year (due to starting a business and trying to do freelance photography). Up to this point my husband was paying my bills. But he was moved from full-time to part-time in december of 08. So the last few months have been rough, which is why i cannot afford the condo anymore.

So i think i pass the means test just on the fact that my average income for the last 6 months has been $0. Way below the median. lol.

What are some caused for dismissing a case? From meeting the lawyer he said i would be fine based on the facts we gave him.

Im still so nervous about everything. Tomorrow is the 1st and the first month i wont pay anything.

[GoFigure]

You do not mention what state your property is located in.

States like CA and AZ are NON deficiency states. Meaning you do not owe the shortage if the lender sells the home for less then you owe.

There are certain rules that apply for each state. But as a previous poster asked, what state is the property in????

I can give you your state law once you post it.

You will be exempt from a 1099-C cancellation of debt from the lender as well if you file IRS form 982.

I am new to this site and I am not sure if the site will let me post links to laws that apply to certain states as well as IRS laws on deficiency cancellation of debts.

[KatInVa]

[KatInVa]

Kristina, I’m in a similar situation and do not plan on filing BK.
The first attorney I talked to did not give me correct information on non-recourse states.
Only after I broke down and talk to my attorney son did I find out this information. He is not a realtor state lawyer or even license in this state but was shock the attorney I talked to did not disclosed this information.
~Kat