Question about trying to rent a place to live before/after filing bankruptcy...

[HAP]

Happy new year everyone (and I do hope it will be a better new year for everyone).

I have a question about renting an apartment/house if we decide to give up our house if we file bankruptcy. I read on some random bk attorney's website that you cannot be descriminated against for filing bk if you apply for housing somewhere (I guess they mean as long as your payment history/credit was okay in the past, the rental place cannot deny you on the filing bk fact alone?) Does this sound right?

I'm pretty sure we would be approved with our credit now if we decided to go find a place to rent before filing but will they see on our credit report that we're still carrying a mortgage (and second mortgage?) and that we're pretty much maxxed out every month, or do they just care about decent credit and someone being able to come up with first month's rent and all the deposits, etc.

Thanks in advance. I've convinced my husband we should probably just give up our house since we're upside down on it with our 2nd mortgage by almost $50,000 so I want to try to time everything just right as far as moving, filing, etc.

Thanks again!

[LadynRed]

I'd be willing to bet that that attorney was referring to federal or state housing. Apt complexes and other commercially run rental properties that pull your credit report can and do refuse to rent to people who have recent bankruptcies, charge-offs and bad credit. I've seen notices that say they won't rent to the bankrupt unless it's more than 2 years old.

It is usually recommended that you try to find a rental by a private party, someone who will not be pulling your credit. You will usually get more space for your money with private party rentals too.

[FreshLikeADaisy]

HAP, I recently had a friend with a really bad credit history, and I do mean bad, rent a house in Fuquay at a really good rate with no problem at all. Three bedroom, just over an acre, and I want to say $800 in rent (this was back in August so I don't remember exactly, but it was a VERY good deal).

As someone else here once pointed out, a house that sits unoccupied for months without a tenant quickly changes your bad credit to no problem at all. As Lady says, a private party is your best bet, and I'm pretty sure that's what my friend did. I love him dearly, but he just can't pay his bills and never could; I would imagine you could drive a truck through the holes in his payment history. Anyway, if he can do it you can too. Your chances are much better outside of Raleigh, though I think he's still technically in Wake Co. Good luck!

[HAP]

Thanks, I'll definitely check into that when/if the time comes.

Another option we may have is my parents own a rental house and have said that we come first over the renters if ever need be. I don't want to boot anyone out of where they're living but they themselves (the current renters) have mentioned to my dad about possibly filing bankruptcy soon and as my parents said they could decide one day that can't afford it and move out with no notice so where would that leave them? It's only about 1000 sq. ft. but the rent would only be $600 a month and would hopefully only be there for a couple of years before maybe we could qualify to buy another house.

The other downside is my son would have to change schools but if he can finish out this year in kindergarten at his current school and start 1st grade at a new school next fall, I think he'd adjust okay (adhd and all that but he's done okay from going from pre-school to new school where he's at now). Ugh, so much to think about and this is just trying to re-locate in the same town.

Thanks again for everyone's input

[spongenotbob]

Happy new year everyone (and I do hope it will be a better new year for everyone).

I have a question about renting an apartment/house if we decide to give up our house if we file bankruptcy. I read on some random bk attorney's website that you cannot be descriminated against for filing bk if you apply for housing somewhere (I guess they mean as long as your payment history/credit was okay in the past, the rental place cannot deny you on the filing bk fact alone?) Does this sound right?

I'm pretty sure we would be approved with our credit now if we decided to go find a place to rent before filing but will they see on our credit report that we're still carrying a mortgage (and second mortgage?) and that we're pretty much maxxed out every month, or do they just care about decent credit and someone being able to come up with first month's rent and all the deposits, etc.

Thanks in advance. I've convinced my husband we should probably just give up our house since we're upside down on it with our 2nd mortgage by almost $50,000 so I want to try to time everything just right as far as moving, filing, etc.

Thanks again!

Hi HAP,

Assuming you're planning to rent from a corporate landlord (i.e. apartment complex, management company, etc), I'd strongly encourage you to go ahead and get moved into the new place before you file. Get a nice, long-term lease also.

That security is worth a LOT.

On the other hand, have you considered offering your current house lender a short refi?

Best regards,
snb

[HAP]

I'm not familiar with what that is but we aren't in foreclosure, we're up to date on payments. We owe $161,000 on our house that may be worth $163,000 with a second mortgage of $47,000. I've convinced my husband that we should just walk away if we can end up filing Chapter 7 since our first and second mortgages total $1750/month, what would a short refi be able to offer us?

[spongenotbob]

I'm not familiar with what that is but we aren't in foreclosure, we're up to date on payments. We owe $161,000 on our house that may be worth $163,000 with a second mortgage of $47,000. I've convinced my husband that we should just walk away if we can end up filing Chapter 7 since our first and second mortgages total $1750/month, what would a short refi be able to offer us?

Hmmm. There's kind of an esoteric concept called lien stripping which your trustee has the power to do -- essentially it would declare the 2nd mortgage unsecured and therefore dischargeable in your BK7; whereas the 1st would remain intact.

The problem is your trustee would only do this if it were benefical to him. Anyway.. you have an interesting (and now very common) situation. Talk to your lawyer and make sure he understands the break-points (i.e. essentially the entire 2nd mortgage is now unsecured in reality).

I think maybe there's something you could do here but I am absolutely not a lawyer. Go speak to a good one about this

Best regards,
snb

[HAP]

Thank you for your input

[erinb1975]

We are in a similar situation, we owe approx. 168,000 on 1st and 42,000 on 2nd, with an appraised value of 175,000. We had gone into see our lawyer with the intention of walking away from our house, however she suggested the lien strip, which will make all of the 2nd unsecured except for 2,000.

We saw this as the best course of action, as this will bring us back to having some equity in our house, and hopefully after our 5 years is up (we filed 13 on 12/20), we will be in the positive on our house and hopefully the market will be better
We hated to throw away 6 years worth of payments if the situation could be rectified.

As a side note, I've been lurking here for a while and found all of you to be more than helpful!!! Keep up the good work!

[nazstar]

We are upside down in our house BIG TIME - about $250K. We walked away from it and are filing 7. In the meantime, we secured a rental, but we lucked out. The housing market is so bad down in Florida that people are sitting on empty investment properties and need help to pay the mortgage. We got a 2 floor townhome with 3 bedrooms, garage, 2.5 baths, on a canal with a huge screened in deck. And the complex has 3 heated pools, tennis courts, etc. The landlord didn't even run a credit check because he needed the place occupied. We worked off a referral from a friend - that was it.

[HAP]

Erin, from what I've read (and told this morning at my first consultation) is that we can't get rid of the 2nd mortgage (at least not with a Chapter 7). Does it depend on the state you live in or just the lawyer I wonder? I have another consult today with an attorney who is a Chapter 7 trustee also, so maybe he can be more helpful than the place I met with this morning. (I only met with a paralegal today at the other place) who said that we make pretty good income now so we might not pass the means test. Not including my husband's base of $660 gross per week, my unemployment is 400/week and I only get about $6500 more in benefits (about 4-5 months) and that's pretty good? Ugh, not what I expected to hear.

[erinb1975]

HAP,

Not sure. The counselor we spoke with during our credit counseling also strongly recommended doing the lien strip as well. Our lawer seems to think it is a pretty done deal, although we've not had our 341 yet. I wonder if it is a difference between a 13 and 7? It may also be the state/trustee as well...we're in OH.

She said the only sticking point could be that they try to say that it is an under-appraisal. That has no merit however, since we got the appraisal 4 mos ago with the intention of refinancing (not filing bk). We were actually hoping it would appraise for at least 214,000. HA!! That's what got us started on this road. Now we're stuck with an ARM

Sorry I don't have any more info for you. Let me know what you find out!