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What would you do? (Walk away/Foreclosure/Short sale/Deed-in-lieu?)

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  • What would you do? (Walk away/Foreclosure/Short sale/Deed-in-lieu?)

    I live in NJ-my wife and I filed CH7 BK in November 2012 due to unemployment and high credit card debt. We were overextended and my wife's job loss sent us over the edge-we were discharged in March 2013 and things have actually improved dramatically since then. My wife has found steady employment in September and I was able to find a higher paying job about a month ago, and now we have no debt besides student loans and our mortgage, which was included in the BK, so we're really just paying to stay here.

    The house is underwater by about 20% and shows no signs of improving-real estate values crashed here in 2008 and have flatlined ever since. We are saving money, investing, and basically getting off to a great start post BK. However, it is killing me to throw money at this house. It's a two bedroom, one bathroom ranch that was great as a starter home, but with one child here and the desire for at least two more, it's not going to serve our needs. Our plan was always to add on, but putting an addition on a home that's already underwater is not a good idea. Right now we owe about $230K and the home is worth about $185K-even if the house improved steadily at 2% per year we'd be at the break even point in 5 years, so it would be going back to square one, 10 years after we bought the place...

    Basically we're just trying to figure out how to get out from under this house in a smart way. Obviously we could stop paying our mortgage tomorrow and start banking the cash. A year's worth of mortgage payments for us is about $26500 (taxes included), so if we were able to string it along for two years we could have $53000 cash at the end of it. The issue then becomes, can we buy a new home with that with a foreclosure on our credit reports? At least the way I understand it, though not paying the mortgage cannot affect our credit, the foreclosure is still a black mark. With the clock having already started on the BK discharge, I'd hate for a foreclosure to set it back. That said, are the other options open to us that would have little or no credit impact? Deed-in-lieu? Short sale, etc...?

  • #2
    diesel73L our house and we also lived in nj. we surrendered our house, however, we knew we were leaving the state. i made every effort to obtain a DIL with the bank which said oh yes, we can do that. no way chase would touch it. we tried everything. maybe today since that was a few years back your lender would be more willing.

    remember nj is a judicial state AND the ONLY state in this country that has N.J.S.A. 46:10B-51, the New Jersey Creditor Responsibility Law. meaning once the bank begins foreclosure it's theirs for all upkeep costs. ( here's the entire statue: http://www.bkforum.com/entry.php?228...onsibility-Law however, prior to leaving we did do and this is now referred to as a "strategic" walk. (i guess that's what they are calling it now when we did it never heard that phase). we did in fact, save up a ton of cash and made our move, not to purchase at that time, but for enough for rental for at least a couple of years , which we paid all up front.

    please do not be fooled a short sale or a DIL also goes on your credit and is just as bad as a foreclosure. actually since you are done with your bk and closed and discharged, if you decide to walk, and 3 years down the road they foreclose, you can fight the Credit Agencies if they list it on your report, of course provided you did list the house on your bk. if you read any of my old threads in our case the property in nj still hasn't foreclosed and it's well over 5 years. good ole nj...one of the ONLY states also that the statue of limitation where deed transfers are 20 years, so your bank can sit like ours has for as many years as they want. i guess my point here is whether it's a foreclosure, DIL, or short sale, it effects your future buying of another home. (no one tells you this of course at the time you think DIL what harm, oh yeah?). now i know the foreclosure you can fight on your credit, but i don't think you can fight the DIL or the short sale being listed. at least that is what i have been told to be fact. i know we did a DIL on one property and it shows.

    now about purchasing a house, if you can pay cash fine, however, getting a mortgage is a whole different story, any bk, short sale, DIL, you will find it almost impossible to get one. actually we thought we would be clear at this point, we own our home free and clear and now am buying another house in another state paying cash, i really don't want to say what the cost of the new home is, but you can get an idea that it's 7 bedrooms and 5 bath, but wanted a small amount of less than 30k and couldn't get it..no way no how. we found out even though there has been no foreclosure, our clock is now ticking with the "Credit Alert Verification Reporting System" aka CAIVRS. once your are on that list there is a count down point that you can get a mortgage. that usually happens AFTER you are foreclosed, this may sound odd to you, however, we were actually happy to hear we were on that list with a date which is 2016, since our bank never foreclosed. that date, as explained to me, once you are finally on that list is your "start" to buy date. my point here is our clock started and the bank never foreclosed. our bk was discharged and closed in 2008, so do NOT count on what you hear from anyone. our date simply appears arbitrary.

    best of luck with what ever you decide. nj is a different animal as we all know in many ways. but at least that law i listed will protect you in many ways, and you can sit for a while and think about exactly which move is right for you.
    Last edited by tobee43; 12-15-2013, 08:22 AM.
    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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    • #3
      -just found some other inform about what a DIL does to your credit it dropped this lady's (on this article) 80-120 points.


      i think it's #5) http://www.bkforum.com/showthread.ph...Blow-Your-Mind
      8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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