Just received foreclosure notice... should I still try to sell home?

[GoneBust]

I was just getting ready to list our home For Sale By Owner when we received a foreclosure notice. We tried listing it for $390,000.00 with Remax three months ago, and eventually dropped it to $339,000.00 by the end of summer. It was appraised at $345,000.00 in 2007 and the property tax records value it at $337,000.00. However, we are in a neighborhood of mostly $250,000.00 homes. We stopped making payments on the home earlier this year when our business slowed down and we couldn't make the lender-mandated payment of $3,500.00 per month. We are now about 10 months or $30K behind on our payments.

Should I try to sell the home myself, or should I just let the chips fall where they fall now that we have been served? We live in Illinois... what rights do we have as far as trying to sell the home? We owe around $302,000.00 on the home... I was thinking about listing it for that. This way I won't have the realtor fees to deal with.

Our hope is to get the home off our back and file a Chapter 7 bankruptcy. Once the home is off of our debtload, the remaining debt will be mostly business-related loans (SBA loan for $75K and four business credit cards totaling $35K). Our personal debt apart from the home is around $50k, so we would qualify for an uncontested Chapter 7 by having more than 50% of our debt business-related. But if our home lender ended up gouging us for $100K after auctioning the home for $200K at a sheriff sale, our chances of filing Chapter 7 might be ruined.

What would you do if you were in my shoes?

Thanks!

[angelasdad]

Your best bet is to sit down with an attorney.

As far as your home. Your $345k home on 2007, is more than likely worth $250-275k now. If you do no intend to keep it, don't pay the payments, don't bother trying to sell it. A chapter 7 BK will cover the debt. Regardless of what it sells for at the sheriff's sale, you will not be liable. You will just get the boot shortly thereafter. Illinois is very backed up with foreclosures. You will be able to stay in your home easily 6 months more than likely a year or 2 until the sheriff's sale happens.

Your other unsecured debt will be covered in the chapter 7......
With the amount of debt you have, I'd imagine your income is high as well, which will be one of the factors for chapter 7 or 13. There are a lot of issues there that an attorney will figure out for you.

[GoneBust]

With the amount of debt you have, I'd imagine your income is high as well, which will be one of the factors for chapter 7 or 13. There are a lot of issues there that an attorney will figure out for you.

I shouldn't have to pass a means test because my debt will hopefully be primarily business debt after I unload the home via sale or foreclosure. That is, unless the bank tries to slap me with a huge deficiency bill - which could change my debt to primarily consumer.

It didn't take too much reading about bankruptcy laws to find business debt clause. They left the old bankruptcy laws with no means test in place for business owners who fail. This means that if 51% or more of your debt is business-related, you do not have to pass an income means test whatsoever. Please feel free to correct me if I read it wrong.

The payoff on our home is $300,000.00 and it would probably sell very fast at $280,000.00 or maybe even $300,000.00. But if we let the bank take it and sell it at auction, we could end up with a deficiency bill of $100,000.00 - which would then make our debtload change from primarily business to primarily consumer. That is why I feel like we need to try to make sure the home doesn't sell at a fire-sale price, because this area is not full of foreclosed homes (yet).

We want to be able to file Chapter 7 without getting our income scrutinized, which is up and down a lot. The only way to do that is if we keep our debtload in the "primarily business" category.

I appreciate your input!

[GoneBust]

Here is an article that explains the Chapter 7 means test immunity for people with primarily business debt:

Debtors whose debts are primarily business debts or other non-consumer debts are not subject to the Means Test and other provisions under 11 U.S.C. §707(b). The provisions of §707(b) are those provisions under which the U.S. Trustee may move dismiss or convert a Chapter 7 case for abuse of Chapter 7.

The provisions applying the Mean Test and other provisions of §707(b) are only for cases of "primarily consumer debts." A “consumer debt” is “debt incurred by an individual primarily for a personal, family or household purpose.” If the debts are not primarily consumer debts, the U.S. Trustee cannot pursue the abuse provisions of 11 U.S.C. §707. In particular, debtors with primarily business debts and/or other non-consumer debts are not be required to file a Means Test.

This inquiry is commonly viewed as consumer debts versus business debts, but instead, it is an issue of consumer debts versus non-consumer debts. “Business debt” is distinguished from “consumer” debt as a debt incurred with a “profit motive.” However the non-consumer debt inquiry is broader than just business debts. There are varieties of debts that have held to be neither a business debt nor a consumer debt.

[GoneBust]

My main question is this: Can I sell the home during the foreclosure process?

[GoneBust]

Bump

[CCCrazy]

Don't even bother trying to sell the home...IL is VERY backed up with foreclosures and usually the banks don't want them. I'm at 1.5 years of no payments and haven't even had my first court date yet...the bank keeps on canceling the court dates. I'm still in the house and living rent free. I'm pretty sure I'll be here until late 2013 or early 2014...rent free. PM me if you want to talk more or have questions, I'd be happy to help.

[GoneBust]

How much is your home worth or what is the value? Can they do anything before the court date? Our home is a valuable and newerer home 12 years.

[CCCrazy]

I bought my home in 2005, thus it's now 40% underwater. Did you answer within 30 days of being served? In IL banks have to go thru the courts for everything...nothing can be done without court approval.

[GoneBust]

I bought my home in 2005, thus it's now 40% underwater. Did you answer within 30 days of being served? In IL banks have to go thru the courts for everything...nothing can be done without court approval.

Yes, I did answer. I replied and told them our predicament and stated that we have not abandoned the home. I didn't know what else to say.

[pathfinders]

your house is more than likey in the 250 or less range, with the internet if you tried to sell it a buyer will know you are in fourclousure and can go to public records and even make a good Guesse on how much you owe. do nothing and you are forgeting the 6% to the rltors for commission the 2 points closing cost and the 2-3 points the buyer will want you to kick in, and oh, any repairs say a roof, the buyer will want for example 10k for that, you are about 100K under water to be honest, Go see a lawyer file, after the chapter 7 is complete, stall you can pay a fourclouser defense attorney 1000, to say 1500 if you are in a Judicial state abd get your day in court, you can ride it out for another couple of years with no payments, leave when you save up some money rebuild your business go back to school... use everything to your advantage, BK is a tool to hit the Re-Start button,,,,,

[pathfinders]

you need to spend like 10 hours on the board and develope a stragity on how you want to file your 7 Plan plan plan,,, you only get one chance for the next 7 years and hope u will never have to file again, all and evry answer to any question will be on this board, Knowledge is the key, a lot of the attorneys are a box of rocks. you need to know as much as they do and more....Interview like 5 and chose the one you like, ask tough questions that you know the answer to and if they give you a wrong answer or do not know... run away

[GoneBust]

Thanks!

If I want to file Chapter 7, I will have to make sure that my debt is primarily business-related. For this to happen, I need to get rid of the home debt without taking on a large deficiency judgment. If it's only $50K on a deficency judgment or short-sale loss, we would still have primarily business debt, allowing us to qualify for a Chapter 7 with no means test.

If we try to stay in the home (i.e. pay all past-due payments), we still have $135K of business debt that we have not been paying on. That would come back to haunt us, and I am sure we would not qualify for a Chapter 13 because my income is a little higher than $85,000.00. Our business is very unpredictable... we might make $25K one quarter and only $13K the next quarter.

We went from having a $150K income in 2007 to $75K in 2008 and $65K in 2009. So even though we are making $85K+, we sold almost everything we own including wedding rings, musical instruments, jewelry, cars, etc., to stay in the home we are in. Every dime we bring in is either going to back taxes ($30K), medical bills, or just trying to exist with a family of four.

It's tough getting your income cut in half when 70% of Americans can't afford a $1,000.00 emergency (according to a recent survey). We fell into the trap just like everyone else did, living paycheck to paycheck and enjoying the American Dream courtesy of Visa and MasterCard. Then one day the paycheck is gone, and it's hard to stop the domino effect - if not impossible.

We found a rental that we can move into, and it has an inground pool. I went ahead and placed a deposit on it out of fear of getting evicted from our current home, and we are now paying monthly payments on that home. Our younger daughter likes the idea of having the pool and she is okay with going to a new school, but our older daughter doesn't want to change schools. The town that we are living in now does not have ANY rentals available. Apparently all the other foreclosees beat us to them. That means we are going to have to change our daughters school disctrict no matter what if we do not pay the late payments and stay here.

Our older daughter is a junior in high school and she does not want to change high schools. She has also been having health issues including panic and seizures... this is not a great time to toss a wrench into her life or ours. I'm probably a little partial - I changed schools 10 times as a kid, with several of them resulting from my mom and stepdad going bust. I wanted to keep this from happening to my kids, but alas here I am.

[IamOld]

Gonebust I just want to send you best wishes....I think stability for kids is VERY important - but maybe if you do move that can be it for a long while.....