Should I walk away after chptr. 7 - upside down.

[Inca]

Hello all,

I have been lurking here for a while and gained valuable knowledge, thank you all. Anyhow, we have been discharged from a chapter 7 bankruptcy 2 months ago and never re-affirmed our mortgage. Well, the reason we filed chapter 7 is because I took a HUGE (over 60%) pay cut at work and could no longer pay the bills. Now it is hard for me to pay the house payments (1st and 2nd) and be able to keep our head above the water. Our house is financed for $120,000 and now it is appraised at $60,000. I am still paying the note for $120,000 and they do not want to work with me for a modification. I am reading that people are walking away from their homes and they haven't even gone bankrupt and are doing so just because of the financial aspect of it. Do you think this is the answer for me?

Considering that I am not going to get raises any time soon and it will still be almost impossible to keep my head above water, it seems like this would be the best answer for me and the family. I can move in with my mother as the house is large enough to accomodate the family and more. How long will it take before I am eligible for another mortgage? Would there be any benefit to stay in my current home?

Thank you.

[ugghh]

What you do (stay or go) probably will not change your ability to get a loan in the future (it is probably listed as IIB on your credit report). If you could rent cheaper I would walk away. This will not have any negative repercussions to it since you included it in your bankruptcy and you did not reaffirm.

I say all this and I don't know all the intiment details of your situation, but I will say it again, if you can rent cheaper I would walk away from a house that I am upside down in by $60k. Especially since they can not negatively impact me.

[SMinGA]

If the house goes in foreclosure, you will not owe anything for the process. I understand it takes 3 years after a foreclosure to be able to get another mortgage. But since current home values have not necessarily bottomed out - buying a house right now is a risky venture!

There is nothing wrong with staying in the house as long as possible. But if you know for a fact you cannot afford to keep paying 1st & 2nd mortgage, then there is no point in throwing money out the window. If the house is worth less than the 1st mortgage balance, some people have successfully stopped paying the 2nd and saved up a little $ from not making those payments to eventually settle w/ the 2nd to remove the lien. That may not put you back above water - but could get rid of some of the negative equity. Its a risky gamble - they could move to foreclose but they'd have to pay off your 1st. So if the house is under water on the 1st, its not likely.

Since you have somewhere else to go though, it might not be in your best interest to stay til you can't any longer. Try to weigh your options without emotions, just from a business perspective.

From your PM to me, I have an idea of where you are - not terribly far from me. I was looking on Zillow today at homes in my neighborhood. One sold for $52k earlier this year - I'm guessing a foreclosure transaction based on the amount. It last sold for $134k in 2006. Other houses that people are occupying and trying to sell are at $90-100k but that is after lowering the asking prices by $30k+ as the months have passed with no luck.