Question about surrendering home...

[aveda6]

Hello, I have been reading these posts but I'm still a bit confused regarding the bankruptcy filing versus surrending our home (and foreclosing). We are in deep debt on the house (excellent credit scores got us all the credit we could have ever used). We owe $198K on the first mortgage, $75K on the second mortgage, $25K on a home equity line and ~$45k in credit card debts. The house is probably worth $220K to $240K.

We make above the minimum for bk7 in New Hampshire, though we may pass the means test as we're relatively close.

We are willing to walk away from the house and go back to renting. We're meeting with a lawyer tomorrow to go over our options after the first lawyer stopped returning our calls when I said I would pay the first non-refundable deposit once he answered a few of the questions I had (questions I got from this website).

I'm not sure how the process goes. If we're willing to give up the house, do we file bankruptcy and move out once we finally close on the bankruptcy? If so, during the time of the filing do we keep paying the mortgages (which I doubt we'll be able to do for long)?

I have read on here that it can take up to 6 months (or longer) for the foreclosure to happen. Is this the same as surrendering the home? I just want to get a fresh start but if I can save money during the bk and foreclosure process then I'd much rather do that. I'm just not clear on how this all works. The other problem is that our property taxes just went up to over $400 per month so I'm not sure if I should keep trying to pay that as well.

Any ideas/suggestions are greatly appreciated. I'm hoping the lawyer we meet tomorrow is a bit better and more responsive than the first.

jim

[onlineuse]

Jim, I'm one state south and went through an identical situation (still going through it). First off, if you are that far over/under the bank will be in no hurry in all likelihood to take it off your hands. Moving out is going to be at your discretion more than likely. MA and NH are very similar in their laws and yours will be most likely handled out of court. In high market times that means from the moment the bank moves to the moment they sell is usually around 90 days.

If you have no treceived anything from the bank yet chances are you are still at Day 0. The moment you file they are blocked from starting the process. They will typical ask for a lift of the automatic stay and because you are surrendering the house the judge will grant it. Ours was granted back in September, yet here it is almost Janaury and we are still at Day 0. Either way, if you file say on 1/2/07, the stay is automatic. They will likely file for relief and get an order to that effect within about 30 days, even at that point it is likely (providing they are not in the process now) another 3-4 months before you would see a sale.

You need to find out from the registry of deeds whether or not any action has been taken. This will be located at your local county court house and may be available online. If the answer is no, and you are about to file, I would guesstimate at the very least you are safe until April. In reality, we hadn't paid the mortgage in 9 months as of right now and there has been no effort to foreclose by the bank, so all of this is variable.

Legally, by surrendering you are just handing over the keys and agreeing not to dispute giving the home back. But, the bank still has to follow the legal procedure to take it back, which in your case involves foreclosure. Some will suggest you try to get a deed in lieu, probably not going to happen with a 2nd mortgage out as the 1st mortgage would have to eat the 2nd one, and it's doubtful your bank would want to take a huge hit on the 2nd.

You'll get plenty of notice before anything happens, just keep on top of things down at the county level, and keep an eye on public notices using the public notice sites like http://nh.mypublicnotices.com/PublicNotice.asp

[Jerry Hodge]

I don't live in your state and don't know what the rules are, but you probably should live in the house as long as you can without paying your mortgage, save your money for a rental, and then file BK after your have a rental in place. There doesn't seem to be any equity in your house to save and deeding the property back to the bank probably won't work because there are Jr lienholders on your property and there is no equity for them to take the house back. If the Jr lienholder/s get wiped out after the 1st or 2nd forecloses, then you may still owe the remaining lienholders as they would become unsecured creditors. The bankruptcy should eliminate those types of debts so that you can get a fresh start. Please confirm with your BK atty.

[aveda6]

Thank you for the replies. Onlineuser are you suggesting to just stay in the house for now and just not make the payments? The only reason I'm considering not doing that is that I want to be able to get a fairly decent rental unit before my credit goes downhill. Even with a poor housing market, the rental companies I have contacted are still being pretty tight about credit checks. Fortunately right now our credit score is in the high 700's so we can get a good deal on a new apartment.

I've debated whether we should just try and live in the house and not pay and wait for the foreclosure process. That's the biggest issue I'm working on right now.

As for the equity in the home, there is definitely none left after the mortgages (not even for the second one). My attorney said I definitely have to wait to file the ch 13 until after the foreclosure starts in order to include the deficiencies of the other mortgages.