Filing Chap 13, Should I let my house go?

[ChrisFL]

Im currently filing chapter 13 bankruptcy and have already included my 2nd mortgage so that is a relief but now im thinking maybe i should just include the house.. Here is my situation
Paid $407k for my house in 2007, First mortgage is $320, 2nd mortgage $87k
My house was appraised recently so I could get the 2nd mortgage included and it came back at $297 however there are 2 houses in my neighborhood (Same house) both asking $250k, 1 is a short sale and the other is private sale. So even after my bankruptcy im still going to be around $70k upside down.

Anyway, now im thinking ill be upside down in this house forever and honestly the location isnt great for me and I dont want to be here for another 10 years.

My wife has good credit, the house and things werent in her name so im filing chap 13 alone so ideally we can buy a new house in a few years in her name but we can't decide if we should let this house go in the bankruptcy or not.

Any insight?

[Fallonedward]

I have the same question

Paid $180k for the house in 1991
1st Mortgage $215k
2nd Mortgage $87k

Home was just appraised at $203k

[SMinGA]

Since I'm not in your shoes, its hard for me to say what is best for you.

I think the questions worth asking:

If you lose the 2nd in the ch. 13 (lien strip) then can you reasonably afford the remaining mortgage payments?

Can you rent something elsewhere that will meet your needs (size, location) for a comparable amount?

Do you have any issues that will make it hard to find a rental - such as pets?

And in the event you're still upside down, do you think this house will meet your needs for enough years to get over the negative equity before wanting to sell/move?

[ChrisFL]

If you lose the 2nd in the ch. 13 (lien strip) then can you reasonably afford the remaining mortgage payments? My 1st mortgage is affordable (now) because they reduced the interest rate for 5 years, i still have 3.5 years left and after that my mortgage goes up $700/month, Im pretty sure I can still afford it then as long as things go well, however, the thought of not being able to is slightly worrisome.

Can you rent something elsewhere that will meet your needs (size, location) for a comparable amount? Yes, I can rent something fairly easily.

Do you have any issues that will make it hard to find a rental - such as pets? I have 2 small (under 14lb dogs) Not sure if that will be an issue or not.

And in the event you're still upside down, do you think this house will meet your needs for enough years to get over the negative equity before wanting to sell/move? The house is very large so it will be easy to grow into, however, the location really stinks for me and the house itself is a little to large for your needs, right now.

I love that we own the house and can do what we want with it without having to answer to a landlord. We have never rented from a person before so that would all be very new to us. We just arent sure what the best financial decision is for us right now.

[Mensa1]

You don't mention anything about the rest of your financial situation, just the house.
Can you qualify for a Ch 7 if you decide to let the house go? If so, based on what you have said thus far, I would say it is a no-brainer. The house isn't worth it to keep and still be over encumbered. Dump the joint, go out and rent on the cheap and your wife will still have good credit. Then when the time is right go buy again at these low, low prices; (assuming you don't have to wait too long and after the mkt starts recovering, whenever that will be).

So what is the rest of your financial picture and how would that enter into the equation? Listing your other debts that might be dischargable, but only the ones that you wife is not a guarantor or joint debtor, since she isn't filing.

[ChrisFL]

Everything has been in my name (except a few small things she has and will keep) Anyway im filing ch13 because I do make to much money for ch7.. We could buy another house in 2 years in her name, yes. We own our own business and the payroll is in my name now so we will have to start paying her for 2 years before she can prove her income to get a mortgage so we were told 2 years.

I have also let go a boat and a few credit cards already so the BK isnt JUST for the house or 2nd mortgage, I needed to file anyway.

[Mensa1]

It is a shame that you didn't shift income to your wife over the past 1 yr. Not sure if you would then qualify for Ch 7 or not but if so, that would have been nice... especially since you might be ok to part with the house... Hindsight is 20/20.

[this2shallpass]

When I filed BK last year My 1st was $500,000 my 2nd was $130,000 I got the second stripped in the CH13 because at the time because the house appraised at $495,000. A year later Zillow has it listed at $398,500. If this house is not your ideal place to live, there's a chance that this time next year, you could also be underwater $100,000. Do you think that after you complete your CH13 that the house will be worth what you paid for it? Better yet that you can sell and actually make enough on the sale to put a decent down payment on a future home within the next 5 years? You have people who have gotten loan mods that will be adjusted in 2013. After these federal "incentive program" homeowner's settle in and start paying their mortgages and realize that their homes are losing value after a few months, it is hard to say what the housing market will look like in a few years. If you could rent (I know i hate the sound of it too but I will soon be doing just that!) for a few years until this "mess" settles down you could be in a somewhat better place.

When I first came on this site, there were so many people like me, trying to save their home. I now see a lot of "In CH 13 want to let go of the house" posts and threads because they are underwater by tens/hundreds of thousands, their homes are falling apart and their property taxes are twice what the home is worth! Unless this house is EVERYTHING you have ever wanted and is "Perfect" then by all means do whatever it takes, if it isn't let it go, "reorganize" and move on with your life. Renting will probably suck but hey, look at it like this, you sign a 1 year lease and realize it's not for you, you got 12 months before you can fix it. If you keep the house with the 2nd stripped and realize that you don't want it, you're gonna be stuck in it a lot longer than that lease. That's my thought.