Post 341 meeting...decided to let house be foreclosed instead of stay and pay.

[Kristy12]

I just had my 341 meeting 2 weeks ago, my lawyer says he thinks all went well, so I'm in the 60 day waiting period now.

My lawyer and I put "stay and pay" for first mortgage of $150,000. We put do not pay on 2nd HELOC of only $5,000. My family's plan was to have both mortgages discharged in chapter 7, and to continue to pay 1st mortgage, insurance, and taxes only, by staying and paying (not pay the HELOC anymore).

Now, my husband has an opportunity for a good job in another state, and we are thinking of letting the house go into foreclosure and stop making the stay and pay payments, to allow us to save us the moving funds.

I understand foreclosure and deed in lieu options for the 1st. Lien, but what happens to the HELOC lien? The house will only sell for about $120,000 (the two forgiven mortgages in the chapter 7 total $155,000).

What is my next step? I live in Iowa which is both a judicial and a nonjudicial state. We would like to stop making payments this coming month, and hope to be able to stay in the house for 4-6 months.

Any advice is appreciated.

[Drazil65]

We did the same thing basically (but right after the discharge). We just stopped paying, our bank would not do the DIL (most banks will not unfortunately). They suggested we put it on the market and try to sell it for a period of 6 months (we did not make any payments during this time), if we agreed to that then they would not start foreclosure until after the 6 months. We agreed with the understanding that should an offer come through and if accepted by the bank as a short sale offer we WOULD NOT jump through the short sale hoops (we put it on the market as a traditional sale). We made it clear if a low offer came through it would be up to the bank to accept those terms and we would not provide personal financial paperwork nor would we fix anything that showed up on the inspection report. It sold as a short sale and they only thing we needed to do was sign the papers for closing.

So maybe this might be an option and you just put up with the showings for the time you are still there. If it does not sell then they can start foreclosure process, it might be worth a try to buy some time. If not then just stop paying and you will get a default notice after about 90 days late I think but you should be ok with your timeline for staying in the house.