Getting Ready To File, Should We Include Home

[jwsmartin]

I am looking for any advise that's out there.

We are signing (chapter 7) with our lawyer mid December, but since we started the process, some things have changed.

I have been relocated and incurred a rent payment. While we can afford both the mortgages and rent now, my wife is a teacher, and could only get out of her contract in Dec or May. We have 19 month old twins, so Dec was decided on. We put our house on the market, but then removed it when we learned we couldn't sell it until discharge.

After Dec, I no longer have two incomes... until September when my wife starts teaching again. We will not be able to afford both places starting in Jan.

First question... should we include our home or not? I really don't want to, but if we discharge, and can't pay our mortgage, wouldn't that be worse.

Second Question... I know it generally takes 2 years after bk to get a home loan, but is it possible to get one sooner. I know it may not be the best idea, but does it have to be 2 years, or will someone give you one if you put enough down.

Annual Income - $115,000/year or $6000+net/month (when she starts teaching)
Car (1) - $658/month
School Loans - $200
No other loans or debts

With no debt, we thought we could get into a house sooner with that kind of income, possibly end of 08. Do I have a chance at all?

Thanks for any advise.

[SinkingFast]

All I can do is relate our experience for you.

And we were not into the really bad market yet, like now.

Summer '04, Hubby lost his job. Feb, '05, Hubby takes a new job. Comparable pay, but in a different State. Hundreds of miles away. Son was a Senior in High School so we decided to wait until Graduation to sell the house. Our market was HOT, HOT, HOT!!

We paid rent and utilites for an apartment for Hubby outa State. Plus kept up the house where the kids and I were staying. We rented the apt from Feb to Aug. Then I moved the family for our kids to start school in the new State. Aug, '05, we're renting a house. Rent payments were suddenly equal to our mortgage.

Plus,.......... You've gotta remember,.......... You won't be there to take care of things either.

We had an acreage property and it was still mowing season. I hired a guy to come mow our place from August to the end of the season. $200 each mow. Because our house was being shown for sale, we left the utilities on. So we had 2 sets of utilities bills.

We had friends who were keeping an eye on the place for us. Realtors would leave lights on. Leave doors unlocked after showings. Our friends went in and turned off lights. Locked doors. One Realtor even left the back door open. Friends kept the toilet bowls clean, vacuumed the carpet, dusted, even put out plug-ins so the house wouldn't smell musty.

We priced our house to sell. Several Realtors all said it should sell for $265K. We went on the market at $252K. No takers. At the end of 2 months, we dropped the price below the "magic" $250K. Still no takers. After 5 months, we got a low ball offer that would barely pay the mortgage off and closing costs.

We burned thru our savings, Hubby's severance, and retirement money trying to keep it all going to sell the house. We finally ran outa money 5 months after moving. In January, '06, we cut off the utilities. A friend went and drained the water lines and toilets so the pipes and bowls would not freeze and bust.

Our house went into Foreclosure. We went thru the whole process and got a last minute offer the week before the scheduled Sale date. Realtors worked fast and furious to put together the deal. Faxing paperwork back and forth to our Lender. Realtors cut their commissions. The Title Company took a flat $100 to handle the closing. Our Lender gave us 30 days to get the deal done and the house sold. We broke even.

Unless you have significant equity in the house you're leaving,........ Don't put yourself thru the wringer. You'll just be doing the Lender's work for them.

At the income level you've mentioned,....... It sounds like you may be a Ch 13 anyway. There's only a hand full of States where a family of 4 can have an income of $90K/yr and be below the Median. If you make around $70K/yr, you broaden the number of States quite a bit.

If you file while your wife is unemployed,........ And your income alone is around $70K or below,.......... In the right State, you could probably qualify for a Ch 7 under Totality of Circumstances. You've had a change in your life that was beyond your control. As a result, you've lost a chunk of your income. Your wife's position.

A lot of whether you'll qualify for a Ch 7 is gonna hinge on how much you make and what State you're moving to.

If you wind up in a Ch 13,............ Buying a house is gonna be an adventure. You'll have to be in the Plan, with on time payments to the Trustee, for a year before you can even try to buy. At that, you'll have to get permission to buy a house from the Trustee first. Then, you'll have to find a Lender willing to work with you.

Just some things for you to think about.

[SinkingFast]

One question for you,.............

What State is your current house located in??

[jwsmartin]

Our Current Home is in Missouri. We have already qualified for the chapter seven. We actually have nearly $80k in medical, credit card debt, and with all bills considered, we barely break even. We were actually starting with a chapter 13, but switched six months ago based on lawyers calculations, so we had to pay the rest of the fees before signing.

Thanks for all of your information.

Happy Thanksgiving

[SinkingFast]

If you only have 1 mortgage on your home,........... The Lender can't seek a deficiency balance against you.

http://www.foreclosurelaw.org/Missou...losure_Law.htm

That's not the case with "Junior" mortgages. A 2nd, a HELOC, other subsequent mortgages.

If the house was the only sticking point,............ You could effectively walk without worry of a law suit to follow. Possibly, the Lender might issue a 1099 for the deficient balance making that $$$ amount tax liable income for you.

To the issue of less than 2 years post Discharge to buy a home,.........

Fannie Mae, Freddie Mac, FHA, and other "Conventional" programs will allow exceptions for people who've had a life altering event that lead to Foreclosure and/or BK. But for the most part, Prime Lenders are gonna stick to the 2 year rule.

That "less than 2 year" time frame lies mostly in the domain of the subprime lending market. With Foreclosures at an all time high and sub prime lenders taking a beating right now, requirements have tightened significantly.

Not saying you won't find a Lender to work with you. Just it's gonna be tougher, and you'll probably pay a penalty in the form of significantly higher interest rates to purchase. Mortgage brokers who post here recommend to wait out the 2 years rather than purchase sooner and look to refi later.

[jwsmartin]

We have a first and second mortgage totalling 150k, and the house is worth just about that much. Would including it cause us to not be able to get a mortagage, or would it be basically the same as if we didn't.

[SinkingFast]

In your case, probably not a big issue with getting a mortgage in the future.

Generally speaking, mortgage Lenders look at your past track record with other mortgages. How you handled a mortgage previously is weighted into the decision of granting a new mortgage.

Surrendering the house in BK may not cause a problem for you in securing a new mortgage in the future. A lot of BK Code is founded in IRS guidelines. If your transfer will meet IRS requirements for deducting travel to the new location as job related expenses, you'll probably be OK.

http://www.irs.gov/taxtopics/tc455.html


Also, getting a mortgage post BK is gonna be a lot like filing BK. You could have the "Totality of Circumstances" thing working for you.

Getting transferred was beyond your control. You being transferred caused your wife to loose her position and her income. Also beyond your control.

Mortgage Lenders do consider these factors as well.

[CindyLou]

In reference to your main question. You are filing a chapter 7. As far as I know you do not have a choice as to whether you include it or not. All debts will be included. Plus, the issue with the lender is not whether you included a mortgage, it is the fact that you filed.

The way it works is when you file you have to state your intention on whether to reaffirm the mortgage or not.

As far as the two year rule, I am in the process right now and its been close to two years and Wells Fargo is working with me. See my post under "Lending Tree Results"