Three years from BK 7....considering letting house go....advice?

[brokeinmichigan]

Our Ch7 BK was discharged several years ago. We did NOT reaffirm our mortgage at the time, and have been paying on time and living in our home since then. However, we owe more on it, than it is worth, since home values have decreased in our area over the last several years. We are planning on moving out of state in a few years, and I'm wondering what others think.

We no longer need this much room, as we only have 1 child left at home. And we certainly don't need our high $$ mortgage payments. I'd like to consider down-sizing, and renting locally until we move south in a few years. I was initially thinking that we could just walk away, rent something close by, and move on. However, after reading here, I wonder if it would make more sense to just stay put, stop paying our mortgage, and see what happens. We may be able to live rent-free for a year or more, and save/invest.

My question is:
Since we didn't reaffirm our mortgage, we have no legal responsibility to pay. Our credit scores are actually pretty good now, and we have established new credit, make all our payments on time, and always pay more than the minimum. What kind of hit will our credit scores take if we have foreclosure? Or will it even show as a foreclosure, since we didn't reaffirm and our mortgage was discharged in our BK?

Also:
In Michigan, how long is it taking from the time homeowners stop paying, until they are required to vacate? Months? Years?

Any advice, opinion, experiences, stories would be appreciated.

Thanks,
Not quite as brokeinmichigan

[IHateToBeEmo]

A foreclosure will put a big negative hit on your credit score, sorry to say. I personally wouldn't let it affect my decision though.

[AngelinaCatHub]

First, check the rental rates around your area. If negligible then stay in the house. Take a trip South and see what you can buy and for what prices. Here in FL there are BIG bargains, but nobody has money. Then do your move or stop payment deal. Secure a Southern mortgage. Perhaps even try to sell the house for what is owed on it. You have plenty of time right now. 'Hub

[ValleYum]

A foreclosure will put a big negative hit on your credit score, sorry to say. I personally wouldn't let it affect my decision though.

I am sorry to be difficult, IHateToBeEmo, but that just isn't true based on the experiences/advice in this forum. The thought is: How can your credit be affected by giving back something you aren't financially responsible for anymore?? <--This is presuming that someone is asking about a foreclosure AFTER their home was discharged in a Chapter 7 without reaffirming their mortgage.

Through title searches, etc. future mortgage lenders will be able to see that there was a foreclosure and their "clock" (regarding the time until they can qualify for or obtain another mortgage -the length of this "clock" varies wildly depending upon who you talk to) will start typically after their default/foreclosure but some folks are saying it may be after the BK 7 discharge.

[ValleYum]

The OP might benefit by a quick call or email to their BK attorney for their take on their choices/options. They may have more/better info on their local area.

[tigerman]

I was discharged Jan 2011 and my last payment was June 2011. supposedly my sale date is at the end of March 2012. It's a 6 month redemption period after that or 1 Year if its over 3 acres(it might be 2 can't remember). I'm on over 5 acres so I will not have to move til March 2013 unless I try and get the sale date pushed back, it could be longer.

[brokeinmichigan]

So, if we didn't make this month's mortgage payment, we'd essentially be looking at staying put until Summer 2013 (approx 9 months until sherrifs sale, then another 6 months)...or longer, depending on how long things are taking. Looking at the houses that are for sale around here, and all the foreclosures, I can't imagine that it would go any faster. So, a couple more questions:
1. What about our 2nd mortgage? We didn't reaffirm either....what happens from that company?
2. What can we expect as far as phone calls, mail, etc. from the bank? Should we talk to them...tell them that we cannot keep this house? What exactly should we tell them/not tell them?
3. Since we didn't reaffirm our mortgage, the house isn't technically ours, right? Even if we did want to it, when it comes time for us to move in a few years, could we even legally put it on the market, since our legal obligation was absolved in the BK? I've been curious about this since we were discharged.

Thanks again for the replies. I have no emotional connection to this house, but also don't want it to sit unoccupied, and of course want to leave it in good condition for the next owners. And while I realize that this is purely a financial issue, it does feel somewhat dishonest/icky to just stop paying the mortgage. How did others here "justify" that in your head/heart? Ugh....such decisions..

[IHateToBeEmo]

3. Since we didn't reaffirm our mortgage, the house isn't technically ours, right? Even if we did want to it, when it comes time for us to move in a few years, could we even legally put it on the market, since our legal obligation was absolved in the BK? I've been curious about this since we were discharged.

Everything stayed the same after the bankruptcy except you were no longer PERSONALLY responsible for the money owed. They can take it back from you by foreclosure if you stop paying, but that's all they can do. If you keep making your loan payments until it's paid off, it's yours 100%.

[norcal]

We have decided to do the same thing. We have paid on our mortgage for two years after we were discharged, but now the home is still at least $100K upside down. We have not made our March payment and I have faxed and mailed a letter to the mortgage company, letting them know our intentions, as we'd prefer to do a deed in lieu of foreclosure. the mortgage is reported as included in bankruptcy and no further updates have been submitted by our mortgage company. Good luck.....

[Miknan]

I'm in the same situation as you as far as the house goes. I'm discharged in Ch 7 Nov 2011. I'm on the verge of foreclosure and my house was included. My credit isn't as bad as I thought it would be, but people I've talked to say its going to take another big hit once it actually does foreclose. I haven't paid in 9 months. I don't feel good about living rent free but it's something we've had to do for the good of my family. My situation is a bit different because I don't want to downsize and desperately want to keep my 3 kids in the same school and I have little to no rental options. I might try to save this house the last second but there are several complicating issues I've talked about in other posts. If you have rental options and might move out of state later and don't want to own again for many years you should stop paying. You'll save a lot of money but be prepared to lose 100-150 pts on your FICO (from what I've read) and not be elgible for FHA loans for three years after the sheriff's sale.

[Miknan]

Also, if you stop paying, nothing happens with the second mortgage. They are screwed. Also, you shouldn't expect much in regards to contact with you. Since it was all included in bk they can't even try to collect from you now. I don't get anything even in the mail from my second. WF occasionally sends a paper showing how much I owe but they state "this is not an attempt to collect".

[machine2]

So I am confused, If the mortgage was charged off in the Chapter 7, why would you take a hit on your credit report? I am in the same boat and I am learning about this.

[ValleYum]

I, too, am confused about that, machine2. It goes against everything I have read.

[indeep59]

You won't take a hit on your credit report if you stop paying on a mortgage that was included in a bk 7.
I got a mod on mine in Jan 2010, made payments for a year, during that year (July) I filed and was discharged for the 7. Had to stop making payments again early last year, did not affect my credit score one iota. It's been ascending ever since the filing/discharge.

[Miknan]

Indeep, did you forclose or just stop paying? I talked to a mortgage lender who said it would drop after forclosure. I've read online it will also. I hope I'm wrong but it seems naive to believe that after bk and forclosure I'd have a FICO of almost 700. If I forclose I expect it to drop.