Good advice or not fr BK attorney?

[grandmasusan]

I have posted about my situation before...I am getting ready to file chap 13 in the next 90 days (waiting since I used CC last month).

Because I am over the max limits for secured properties, I am in the process of selling my rental. I owe 495k total with a 1st and 2nd. I received an offer for 400k which is low for what I owe, but fair market value since the property has lost significant equity in the past 2 years. When I told my BK attorney about taking the "short" offer he said not to as the 2nd mortgage lender will send me a 1099 for the deficiency balance (roughly 100k!). He said to just let the property go into foreclosure to avoid the 1099.

Here's my question, the 2nd mortgage lender may be willing to accept the sale of the home if I promise to pay back the deficiency balance. Could I do this and then file BK and disharge the balance? It seems rather sneaky of me to do, but I need to get rid of the home in order to file or else I get moved to a Chap 11!

[SinkingFast]

Many States, the primary mortgage can't seek a deficiency balance against you when the property goes into Foreclosure. But the same cannot be said for the 2nd. Once the underlying property securing the loan is sold or Foreclosed upon, a 2nd mortgage becomes and Unsecured Loan. A 2nd mortgage holder can seek a deficiency balance from you.

Your attny's advise was spot on. Wrangling around may well put you in a position of committing fraud. Let the property go into Foreclosure. File BK.

Since you're looking at a Ch 13, let the Mortgage holder get paid whatever share of the pie the Trustee gives them thru the Plan. Once you're done with Ch 13, your debts will be Discharged and you'll be done with it.

[grandmasusan]

Sinking fast,

Thank you for your input. When I went to speak to my attorney he did say that I could still file a Chap 13 while still owing the rental. We would just disclose to the trustee that the rental was being let go and that I was surrendering it to the lenders. This so that I can be under the limit for secured property. He said it could be done. He wasnt sure if the trustee would be okay or not.

I just wanted to wait and get the rental gone so there would be no issues in filing the 13 but now that I know the best case is for me to let the rental go into Foreclosure, there's no point in really waiting to file. Other than saving some money to pay for my attorney and take care of some things around the house that has been neglected!

Now that I know I am going to file, I feel a sense of relief. And while I made $12k in March, my salary in April is going to be $1500. So I will need the exra breathing room of not paying 3300 a month in credit cards and 3000 to the rental. While I was thinking of filing in 3 months I may wait a little longer to file since my income is going to be very low starting now. Being in real estate is a bad thing!