Considering letting the house go….

[hms]

I just want to put this out there, to hear ideas from everyone and get some feedback.

I posted for the first time a week ago in the Ch. 7 board, asking about my car, which is not exempt. I got great feedback over there. In that thread, I stated that I was keeping my home. My BK was filed 3 weeks ago, and I have my 341 meeting in 2 weeks. I am filing individually; my husband is not involved in the BK.

When I met with my attorney and he asked my intentions on my home, I immediately stated I was keeping it. I didn't consider anything else. I have lived here for 13 years -- bought it on my own after my divorce, and then when I remarried 4 years ago, my current husband short-saled his upside-down condo and moved in with me. The house is totally in my name. My 2 kids are away in college, so it is just me, my husband, and our 4 small dogs. I am current on the mortgage and the very very low 2nd mortgage of only $1,200.

But after reading these boards, talking with others, and really thinking -- I am actually considering letting the house go. In my BK petition, it states I will "stay and pay," as that was my intention. But now I'm not so sure.

I live in Central Florida (Orlando), and I have $10,000 equity in the home. I owe $125,000 and it's worth about $135,000. The mortgage is low, which is why my initial instinct was to stay. With taxes/insurance factored in (I pay those annually on my own), I pay just over $1000/mo. for the house.

HOWEVER….this house is in real disrepair. Something is always happening with this place that I have to put $$ into, as it's an older home. If I were to try to sell it, I would have to put WAY more than my $10,000 equity into it. I could list off everything that would have to be done, which ranges from electrical to painting to new carpets to broken fence and more (and now I think one of the bathrooms has mold), but I think you get the idea.

I am thinking that I may just stop paying on the mortgage and live here rent-free until I'm kicked out. After all, if I try to sell in a few years, I would spend THOUSANDS of dollars fixing up the place, to MAYBE break even. If I'm lucky. I really think it's likely I'd take a loss. My intentions were only to stay here another couple years anyway, and then buy/rent a place, possibly out of this area.

I haven't completely made a decision yet, which is why I'll likely pay my Nov. 1 mortgage payment. My 341 meeting is on Nov. 5.

From all I've read here, it seems I can just stop paying on the mortgage and the taxes (keeping the insurance)….correct? And then just wait it out until the place is sold and I have to leave? Are there any pitfalls I'm missing, or any thoughts someone thinks I need to consider into the equation? Should I go into the 341 meeting with the papers as-is, stating I intend to stay-and-pay…and then after the meeting just stop paying? Or is there a benefit to editing my petition and telling the Trustee I intend to let it go? (I am still unclear exactly how home equity exemptions work and if I DIDN'T claim the house exemption, if it would save my car which is not exempt).

You all are so wise, and I encourage your honest thoughts. Thank you!

[LadyInTheRed]

It may be that you can amend your petition to change your exemptions and save your car. Ask your attorney. But, you need to make sure that if you surrender the home, that the housing allowance is high enough for you to still pass the means test. Even if the change doesn't jeopordize the means test, it does force you to make a decision about your home now. You sound a little undecided. If you exempt your home and do not reaffirm the loan, you have the option of staying until you are ready to leave and walking away in one year, two years or five years. You may even gain some equity and make a sale more attractive. Please contact your attorney asap to discuss your options.

[bcohen]

Before you do anything hasty, I would suggest that you consider the following two points:
1) All houses (new or old) need repairs, and all homeowners are SUPPOSED to set aside money each month for the inevitable repair. Therefore, you should consider your cost to own the house as not only mortgage payment, taxes, and insurance, but also a couple hundred bucks a month more for your "repair reserve".
2) In many parts of the country--and Florida is definitely one of them, it costs a LOT more to rent a particular house/condo/apartment than it would to own one. Your $1200 to $1300 average monthly cost to own could easily be replaced with a $3000 to $4000 rent payment on a similar house. Unless you are willing to downsize to a 1-bedroom apartment (or live in a terrible neighborhood), it may be impossible to rent anything for what you are paying now.

Since you do have some equity, despite the repairs needed, and since the house is in fact livable, I do not see that you benefit from "walking away". Presumably, once you fix something in your house, that same thing does not break again, so eventually you will be able to bring the house back up to excellent condition.

[mynameainttracy]

You also need to consider any issues that may arise if you do leave and need to find a rental that will allow 4 small dogs.

[Freddy03]

We are actively looking for rentals and in Central FL (Where this poster lives) and you can rent a pretty decent 3 bedroom house for under $1400.

[hms]

Thanks for all the input. Definitely some things to consider! I guess the good news is that I really don't have to make any decisions now….keep paying on the mortgage as always, and I can always decide later, whether that's in 3 weeks, 3 months, or 3 years.

In the meantime, I may get a handyman/contractor to come and look at the house and give me an estimate of what it would cost to fix the place up to selling condition (since we did plan to sell/move within the next couple years anyway and downsize), just so I know. I know repairs will be significant, but getting an actual estimate will help. And it's a great point about how homeowners should be putting away some $$ each month for home repairs…but I haven't been doing that in 13 years -- just fixing things as I go -- or NOT fixing them if they aren't necessary, and the repairs are enormous at this point. Just how enormous remains to be seen…. In my rough guesses, I am thinking around $20,000.

And very good point about finding a rental with 4 small dogs. We've thought about that, and my husband and I said there are 2 things we absolutely MUST have in a place when we move out: (1) at least 2 bedrooms, so my kids have a place to stay when they come home from college and (2) a place that accepts our dogs. Two of them are really old and not doing well, but if they are still around when/if we leave, they are coming with.

Thanks for your insights. One of these days, when this is all behind me, I hope I can be the one on here giving advice.

[Drazil65]

For all the reasons you stated about how much it costs to "own" (and we all know you don't really own it until it is all pd off) and how "it's always something, I can tell you from experience that downsizing and renting has been one of the most amazing and freeing feelings in the world! We did a stay and pay for a while the started banking the mortgage amount in a "we are moving and renting account", adds up very quickly. We had a new custom home that was only 3 yrs. old and there were still things that we needed to sink money into every month (not to mention all the work in the yard or keeping things up) in addition to the mortgage. Constant upkeep plus our goals had changed drastically and we wanted to be able to live on one paycheck (bank mine) and on cash so we knew we were not staying in house shortly after discharge. Hard decisions but the trade off is literally peace and contentment and someone else fixes everything and cuts the grass.

You can always think of reasons you cannot do something but it can be a challenge to think of reasons to go against the grain and completely change your lifestyle. You can make that decision after all is said and done but don't stay there because you are comfortable and complacent if it is a true burden on you to live there. Make sure that fresh start is exactly that, a new and fresh start where you are the one controlling your future not the banks. If something happens in the future and one of you does not have that job any longer I guarantee that your mortgage company will not be helping you pay your bills during that time so think about yourself first. Good Luck.....

[mynameainttracy]

We also did a stay and pay and then about 2 years into our plan we woke up and realized that the housing prices in our neighborhood had taken a nosedive. We realized that if we stayed and eventually needed to sell (this wasn't a "forever" home) we would have to come to the table with about $50k. This was never going to happen. We saw this as an opportunity to get out of what could be a very long situation of being stuck. It turned out to be the best thing we ever did. We lived about 30 miles from our jobs at the time and were able to move closer to rent thus eliminating our commutes, my husband got his dream job in another state a couple of years later and we were able to leave the area and now we are building a house. We have successfully made it through underwriting and close in April. The neighborhood we left has never recovered and home prices are roughly 35% less than what we owed.

We were lucky in that the mortgage holders FC'd quickly and our clock got started on having the deed out of name. We also had a trustee that believed that we should be in a better place when we finished our plan than when we started, thus never touching our tax returns or increased salaries.

For us walking away was the right thing to do and I only regret not walking away sooner or even when we filed.