Foreclosure after Chapter 7

[samson420]

I just finally filed my chapter 7 case. The only way I was able to file is by so called keeping my house since my income was way too high.

Which is a first mortgage of 206k and a second mortgage of 51k. My house has been appraised at 94k last week. The chapter 7 will be getting rid of 68k of unsecured debt, which is great. But, I can not afford my house any more since my wife left me. I can not pay my modified amount at all.

I am looking to walk away from my home. But, what will happen to my second mortgage? It is a 125% loan. I read a lot of info online about my state of Arizona. But, I just can not make sense of it. Will I get sued? What will my divorce do to the remaining debt when it is finalized?

Also, How long do I have after my hearing date to get out of my house if I stop paying on my first mortgage? I am current as of right now. . . .

I really wish I did not have to leave my house. If it was just the first mortgage, I would try my best to make it work. But my second makes it absolutely impossible. I know I can settle my second, but I can not get the funds, I am literally Bankrupt

[IBroke]

If you get a discharge under CH7, you aren't responsible for any debt that would be left after a foreclosure (legally, there is no debt after a CH7, the mortgages are only secured by the property but not by your responsibility any more - neither on the first nor on the second mortgage).

If you wanted to keep the house, I'm curious why you didn't file CH13. What's the value of the property? Less than what you owe on the first mortgage? If so, the second mortgage could have been stripped..

[samson420]

Thank you for the reply. But, I believe you did not read parts of my post. . . .


The house is not included in the Chapter 7 in my case.

[DeadManCrawling]

Deleted for misinformation. In my Friday night wine-induced state, I misread the post. Apologies to the academy, God, my family, my director, Paris Hilton, and everyone I forgot who made this the award-winning outstanding mess that it is.

[IBroke]

Thank you for the reply. But, I believe you did not read parts of my post. . . .


The house is not included in the Chapter 7 in my case.

Well, I think I did. If you had the mortgage PRIOR to FILING CH7, it WAS included. You can't pick what's included and what not.

[doingpoorly]

Did you sign and have filed reaffirmation agreements on your mortgage(s) ?

[DebtEnder]

If your case is still active, which based on you saying you just filed, then yes your house should be included in the BK. Now if your saying you signed an INTENT to reaffirm the house so you could include it's expense to pass the means test that is fine. That does not mean you are stuck with the house. If you did not even put your mortgage on your list of creditors I would amend my filing for that just to cover the paperwork aspect and prevent any legal loopholes. There is absolutely no reason to walk out of a BK court saddled with a personal house debt.

If you have already signed re-affirmation paperwork you can even rescind that I think up to 60 days after you signed them.

[samson420]

I don't understand the above statement. . .

I can not file for a Chapter 7 according to my income. Me and my wife make 80k+ a year.

To file as a chapter 7 the lawyer stated I pay on the house until the case is filed. When it is filed I stop paying. When I stop paying the the financial institution of the mortgage will file a motion to lift stay. I will be kicked out. . . No one ever mentioned shit about the second mortgage until I brought it up. The lawyer's office had no answer as of now. . . .

WTF?

What am I missing?

[lrprn]

I don't understand the above statement. . .

I can not file for a Chapter 7 according to my income. Me and my wife make 80k+ a year.

Now I don't understand. You stated in your initial post that "I just finally filed my chapter 7 case." Now you are saying you can't file Ch 7 because your income is too high?

To file as a chapter 7 the lawyer stated I pay on the house until the case is filed. When it is filed I stop paying. When I stop paying the the financial institution of the mortgage will file a motion to lift stay. I will be kicked out. . . No one ever mentioned shit about the second mortgage until I brought it up. The lawyer's office had no answer as of now. . . . WTF? What am I missing?

What your lawyer is doing is allowing you to count your high mortgage payment when you file - this may be necessary with your high income so that you won't show any disposable income on your Means Test and Schedules and you can file Ch 7. Then after filing you will stop paying the mortgage and allow the house to be foreclosed. As long as you don't sign a reaffirmation agreement, you can walk away owing nothing on your first or your second mortgage.

Here's the nice part. Chances are you can stay in your house for months after filing rent-free before the bank gets around to filing with the court to lift your stay, has the hearing, gets the auction scheduled, and then has the auction. That means you can save up what you would have paid for your mortgages instead for when you move out. It will make a nice little nest egg.

Does this make more sense?

By the way, you said in your second post, "The house is not included in the Chapter 7 in my case." Actually it is included because it's listed as an asset on your filing papers. It's just that you don't intend to surrender it until after you file. That's just good bankruptcy planning and the best way to get a real fresh financial start.

[samson420]

What your lawyer is doing is allowing you to count your high mortgage payment when you file - this may be necessary with your high income so that you won't show any disposable income on your Means Test and Schedules and you can file Ch 7. Then after filing you will stop paying the mortgage and allow the house to be foreclosed. As long as you don't sign a reaffirmation agreement, you can walk away owing nothing on your first or your second mortgage.

That is exactly it. That is the way the lawyer planned it. But, wouldn't the second mortgage become a unsecured debt after I lose the house? And then my BK would be completed. So it will pretty much look like I will have a big fat unsecured debt that I can get sued for since I have no more bills, really.


I also figured the same thing about staying in the house rent/mortgage free for about 3-5 months after filing, which was last Thursday.

[NewLifeAhead]

That is exactly it. That is the way the lawyer planned it. But, wouldn't the second mortgage become a unsecured debt after I lose the house? And then my BK would be completed. So it will pretty much look like I will have a big fat unsecured debt that I can get sued for since I have no more bills, really.


I also figured the same thing about staying in the house rent/mortgage free for about 3-5 months after filing, which was last Thursday.

A second mortgage becomes unsecured (lien stripping) in a chapter 13 when your house is under water like in your case. Since it would now be unsecured, this debt would be discharged like your credit cards.

In a chapter 7, your personal liability is removed from both the first and second mortgages. The liens still exist on the house but you are no longer responsible for the debt.

[samson420]

In a chapter 7, your personal liability is removed from both the first and second mortgages. The liens still exist on the house but you are no longer responsible for the debt.

Even if it is not a part of the Chapter 7 discharge?

[NewLifeAhead]

Even if it is not a part of the Chapter 7 discharge?

It is part of the discharge. You listed your house as if you're going to keep the house in order to file 7. Now since you will not be signing any reaffirmations on these mortgages (1st or 2nd), your liability on the mortgages ends with the discharge. As soon as the payments stop, they will begin the foreclosure process.

I am going through this now.

[samson420]

Wow, kick ass. . . . This is all very good to know. . . Is this 100% true?

[Amy26]

Yes, your 2nd mortgage is included in your bankruptcy and if you do not sign any reaffirmation paper than when you're discharged its all discharged... The only thing is waiting for the bank to foreclose on it after you're discharged. You could be waiting quite a long time before the home is no longer in your name. If you have any HOA fees or Condo dues you will be responsible for paying for them until the house deed is no longer in your name.