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Letting house go... some questions

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  • Letting house go... some questions

    Filed for Ch 7 in March, had 341 in May with no issues, awaiting discharge letter that should be coming any day now. I am not keeping my house (main reason I filed)--it is worth way less than what I owe on it and I want OUT for a plethora of reasons. I haven't made a payment since January.

    Anyway... a few questions with this. I just got the 2nd half property tax bill that is due in August. My BK attorney told me back when we started the whole process that I do not have to pay any property tax bills if I am not keeping the house... I forget exactly how she explained it, but that bill doesn't count as a new debt incurred after filing for BK?

    Also... I checked my credit score today. It is in the low 600s due to non-payments/filing for BK. I was actually kind of surprised it was that high--it was in the mid- to high-700s right before I filed for Ch 7. Down the road when the house gets foreclosed on, does my credit take a second hit?

    Also... my homeowner's insurance was being paid out of escrow. It was paid in full for this year back in January, so I am good through 2017. What happens next January (if I still have the house) and it's time to renew the policy?

  • #2
    Originally posted by teekay View Post
    Filed for Ch 7 in March, had 341 in May with no issues, awaiting discharge letter that should be coming any day now. I am not keeping my house (main reason I filed)--it is worth way less than what I owe on it and I want OUT for a plethora of reasons.
    I would only recommend "walking away" from a house if it's worth much less than what you owe and if the total monthly cost to keep the house is more than the total monthly cost to rent. For example, if your monthly mortgage payment, taxes, insurance, and HOA (if applicable) come to $1500, but comparable homes rent for $2000 per month, then it makes sense to keep the house, even with negative equity. You can always "walk away" later if the house suddenly needs some major expense, such as a new roof, which you can't/don't want to pay for.

    Originally posted by teekay View Post
    I just got the 2nd half property tax bill that is due in August. My BK attorney told me back when we started the whole process that I do not have to pay any property tax bills if I am not keeping the house... I forget exactly how she explained it, but that bill doesn't count as a new debt incurred after filing for BK?
    If you definitely don't want to keep the house, then ignore the property tax bill. Property taxes run with the land, not with the person. In other words, if the taxes go unpaid, then the city/county will place a lien upon the property, which will be sold to an investor, who could then foreclose on the lien at some point. Most likely, the bank who holds your mortgage will pay off the taxes upon receiving notice that they are delinquent, so as to not lose their collateral.

    Originally posted by teekay View Post
    Also... I checked my credit score today. It is in the low 600s due to non-payments/filing for BK. I was actually kind of surprised it was that high--it was in the mid- to high-700s right before I filed for Ch 7. Down the road when the house gets foreclosed on, does my credit take a second hit?
    No, once the mortgage was discharged in bankruptcy, it must show up as "account included in bankruptcy" or similar notation, with a balance owing of $0. If the lender subsequently forecloses on the property, they cannot legally place any derogatory information on your credit reports, as that would violate the discharge injunction. Your credit scores should not be affected.

    Originally posted by teekay View Post
    Also... my homeowner's insurance was being paid out of escrow. It was paid in full for this year back in January, so I am good through 2017. What happens next January (if I still have the house) and it's time to renew the policy?
    While you are living in the house, it's a good idea to maintain homeowner's insurance. Once you move out, or the bank forecloses, then it ceases to be your problem. If you do not fund the escrow account, then the lender will put "force placed" insurance on the house to protect their investment. They cannot legally come after you for the cost of this insurance.

    Comment


    • #3
      Originally posted by teekay View Post
      Anyway... a few questions with this. I just got the 2nd half property tax bill that is due in August. My BK attorney told me back when we started the whole process that I do not have to pay any property tax bills if I am not keeping the house... I forget exactly how she explained it, but that bill doesn't count as a new debt incurred after filing for BK?
      Property taxes are said to be a tax that runs with the land. The express, runs with the land, means that the taxes attach to the land and not the owner personally. That is why there is no new debt as the taxing authority can just foreclose to collect any tax. (In actuality, the taxing authorities usually sell "tax certificates" and those certificate holders can eventually foreclose upon the property in order to recoup their investment.)

      Originally posted by teekay View Post
      Also... I checked my credit score today. It is in the low 600s due to non-payments/filing for BK. I was actually kind of surprised it was that high--it was in the mid- to high-700s right before I filed for Ch 7. Down the road when the house gets foreclosed on, does my credit take a second hit?
      You should not experience any hits from the home foreclosure. The loan should be listed as IIB -- included in bankruptcy -- in your credit report and there should be no other notations.

      Originally posted by teekay View Post
      Also... my homeowner's insurance was being paid out of escrow. It was paid in full for this year back in January, so I am good through 2017. What happens next January (if I still have the house) and it's time to renew the policy?
      The lender will likely put in force-placed insurance (FPI) on the property, but likely will just keep paying the insurance with a negative escrow balance. Even if the lender puts in FPI, that will only protect their interest in the property. You are not responsible for FPI since you surrendered the home.

      I don't recall if you're staying in the home until the actual foreclosure or if you actually have moved on (pun intended). The real kicker will be how long it takes for the lender to foreclose. It took the lender almost a year after discharge of my Chapter 7 to foreclose on one of my investment homes even though they had relief from the stay and I agreed that they can come and get it!

      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


      • #4
        Less the informative section on determining the better value (keeping home versus renting or buying another), bcohen and I used nearly the same words.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5

          Thanks for answering, justbroke and bcohen.

          Originally posted by justbroke View Post
          I don't recall if you're staying in the home until the actual foreclosure or if you actually have moved on (pun intended). The real kicker will be how long it takes for the lender to foreclose. It took the lender almost a year after discharge of my Chapter 7 to foreclose on one of my investment homes even though they had relief from the stay and I agreed that they can come and get it!
          I have moved out and if I could, I would just drop the keys off at the bank and tell them it's all theirs--I just want to be done with it. The house is in Cook County IL. A quick Google search shows foreclosures in IL take anywhere from 12 months up to 2.5 YEARS. The property value crashed in 2008 and has not even come close to recovering to what I still owe on it...not to mention property taxes went up $1000 this year (I am SO glad I don't have to pay that bill anymore)...the lender tacked on flood insurance about 6 years ago, which was running an extra $200 a month... the school district it is in has gone down the tubes in the past 5 years or so... Lots of reasons to bail.

          Comment


          • #6
            Yes. Certainly lots of reasons to move on. You can approach the lender about a deed-in-lieu (DIL) if there is only one mortgage/lien on the home. The taxes would have likely been resolved by the lender to protect their collateral. As for the DIL, you may be required to list the property. Here in Florida, the banks took a moratorium on foreclosures, at least the big banks did, from about 20010-2014. It was very strange as they didn't want to pay the nearly ubiquitous HOA/COA fees attached to most properties. They literally let the homeowners stay in the homes so long as the HOA dues were on time. Some folks stayed 5 years in their home with no payments to the lender.

            I hope that they finally come along and at least start the foreclosure process.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              Unfortunately there is a HELOC on the house as well, so I don't think DIL is a possibility.

              On a happier note... my discharge letter showed up today. I also got a letter in the mail today that the town is re-classifying a couple nearby properties from residential to commercial/retail. Yet another reason I'm glad I'm on my way out of that house... I don't even want to know what they have up their sleeve with this project.

              Comment

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