Is this a bad idea? - Letting house and car go back -

[sloppyjoe]

Hello Folks,

My wife and I just paid our attorney today to start the chapter 7 process. Initially the plan was just to get rid of our unsecured debts but a thought ran through my mind today.. and I'm just wanting some perspective on it from others who may be/have been in a similar situation.

We're not behind on house or car payments but the fact is.. I feel like I'm paying too much for the car and we've been wanting to move for a while anyway.. our monthly fuel costs are over $200 just to go back and forth to work and since the baby we've outgrown this place.. we both work in the same town and live 30 miles away. I feel like this may be an opportunity to let the house go and find a nice rental property near both our work.

I'm not looking for a definite "You should do X" but has anyone done this or could point out things that I may not know to consider with this. I've not brought it up to our lawyer yet.. I was just wanting to roll it around in my head a bit more.

Your thoughts, comments, and input are most appreciated.

[BobMango]

Well, bankruptcy is supposed to give you a fresh start. If getting out of the house and car will improve your situation I'd give it serious thought. The downside is you'll need to consider how to replace your house and car. It may be 2-3 years or more before you can get a new mortgage. The car is less difficult to replace but your interest rate could be quite high.

I'm keeping both my house and my vehicle, but I have significant equity in my vehicle and the credit union has agreed to lower the payment. My house payment is reasonable and I don't think the value will drop significantly below the loan value. We are planning on reaffirming the vehicle but doing a ride through on the house.

Good luck!

[sloppyjoe]

Thanks for the reply!

I'm hoping we can just rent for a few years really.. I bought this house when I was 22 and married to a different person and generally just had a different life plan than I do now... So not being able to get a mortgage for a few years would be ok with me as long as we can find a decent place to rent within our budget. I'm just worried about finding a place to rent that won't mind the bankruptcy.

As for the car, it's sort of the same situation.. I have no significant $ to make a down payment. I bought this car new and just made a bad decision on it (tried to do better for us by trading in a SUV on a small car for better fuel efficiency for the drive to work but ended up not getting the savings I'd hoped because of the higher payment -- not to mention the pushy salesman ). I just worry about getting another car with the bankruptcy on my credit.

I'm reading stuff here on the forums about both of those topics though so I hope to find some good info there to help me make the decision.

[estreeter34]

Sloppyjoe:
We did a BK (ch 7) last year. It was a hard decision, but we let 2 vehicles and our home go in the bk. We moved across the country and rented an apartment with no problems. The rent is about half what the house payment was and we also bought a car for cash and financed a mini van about 6 months after discharge and got a decent rate. This is just our case. We have good income and i am sure that helped with the van. Mind you it is a decent rate, 14%, not the 5-6% we previously had, but it was good considering....We are almost a year from discharge and have both got mastercards with $1000 limits (we don't use them unless we have the cash to pay the next day) and our scores are in the high 600's.
If you can move closer to work and feel better then it might not be a bad idea to let the houose go. You have to make that decision. You only get this chance once, so think hard and make a good decision based on your needs!