Disadvantages of giving back the house in 13??

[julsmom]

Ok so most of you know but DH & I have separated & now are going back to talk to atty on where we go from here. He has 2nd household now & is paying for the apartment & I am tryiing to make the mortgage, with the ARM that resets this summer, there will be NO Way I can afford to keep this house on my own....so my goal is to HOPE I can get qualified for the 7 (I was within 2K for income so hoping we can push this) & I will give back this house & walk away. I should be able to stop payments, save for at least 3 months....maybe closer to 6 & have a nice large deposit on rental since my credit is screwed. But I see a lot of folks talk about the possibility of mortgage companies coming back for deficiency balances. I am wondering & will talk to atty about all this but wanted your thoughts & opinions. 1st is with EMC & they could possibly come close to breaking even or not lose a great deal to foreclose & resell. Just sucks that they won't look to keep me here & work a loan mod but whatever, they are useless & I have decided this is just a house & I am ready to move on. the 2nd mor (which was to be lien stripped as part of the 13) was with GMAC< now I know if I walk away & don't finish this plan, the lien strip doesn't happen....so I wonder/ponder now...if I have to stay 13 due to income am I better off to try to stay here & finish this BK plan or walk now. Decisions, decisions....ughhh! Just the stress of it all is just too much

[espo1357]

Ok so most of you know but DH & I have separated & now are going back to talk to atty on where we go from here. He has 2nd household now & is paying for the apartment & I am tryiing to make the mortgage, with the ARM that resets this summer, there will be NO Way I can afford to keep this house on my own....so my goal is to HOPE I can get qualified for the 7 (I was within 2K for income so hoping we can push this) & I will give back this house & walk away. I should be able to stop payments, save for at least 3 months....maybe closer to 6 & have a nice large deposit on rental since my credit is screwed. But I see a lot of folks talk about the possibility of mortgage companies coming back for deficiency balances. I am wondering & will talk to atty about all this but wanted your thoughts & opinions. 1st is with EMC & they could possibly come close to breaking even or not lose a great deal to foreclose & resell. Just sucks that they won't look to keep me here & work a loan mod but whatever, they are useless & I have decided this is just a house & I am ready to move on. the 2nd mor (which was to be lien stripped as part of the 13) was with GMAC< now I know if I walk away & don't finish this plan, the lien strip doesn't happen....so I wonder/ponder now...if I have to stay 13 due to income am I better off to try to stay here & finish this BK plan or walk now. Decisions, decisions....ughhh! Just the stress of it all is just too much

With the ARM resetting, you might be able to qualify for a 7, especially if the payment goes up significantly.

As for the home and in a 13, you can walk from the home and stay in the 13 (at least my lawyer tells me that I can).

I am in a similiar situation. I am stuck in the 13 because I make too much. I am not sure what to do yet, but its likely that I am going to walk, and then pay cash for a condo (they are cheap where I live).

Seems like you are better off to wait and see if you can qualify for the 7 when the payment goes up. And if you don't qualify for the 7, you might even get the 13 modified for a lower payment, as you now have to pay more for housing.

good luck.

[LadyInTheRed]

But I see a lot of folks talk about the possibility of mortgage companies coming back for deficiency balances.

A defeciency is only an issue if you complete the Chap 13 with the intention to keep the house and the walk away after your 13 is discharged. Since the mortgage for a home you are keeping is not discharged in a 13, you would be held responsible for the deficiency if allowed by state law. If you amend your 13 to give up the home, any deficiency would be an unsecured debt and the unpaid portion would be discharged in the 13.

[markdel16]

I thought it worked different then that. I'm in an active 13, and my mortgage shows IIB. I did not reaffirm and it was my understanding that I can walk away from the home at ANY time, not just during the active 13, and be liable for nothing.

[LadyInTheRed]

I thought it worked different then that. I'm in an active 13, and my mortgage shows IIB. I did not reaffirm and it was my understanding that I can walk away from the home at ANY time, not just during the active 13, and be liable for nothing.

I originally thought that was the case too. But, I have since learned on this board that a mortgage on a primary residence that is not paid off during the plan is not discharged (actually it may not be limited to a primary residence, I don't remember for sure). I at one point found the section of the bankruptcy code that excludes the mortgage from discharge. But I was unable to find it when looking again recently. The US Bankruptcy Court website does say "Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage)" http://www.uscourts.gov/FederalCourt...Chapter13.aspx

[espo1357]

I thought it worked different then that. I'm in an active 13, and my mortgage shows IIB. I did not reaffirm and it was my understanding that I can walk away from the home at ANY time, not just during the active 13, and be liable for nothing.

My lawyer told me that I could walk after the 13, and not be liable. It just depends on your court, I think.

[newbie2]

My lawyer told me that I could walk after the 13, and not be liable. It just depends on your court, I think.

Huh? It doesn't depend on the court or the trustee..it's in the BK code itself: Chapter 13's are reorganization plans, NOT a "you're done" discharge. Secured debts (unless they are surrendered in the plan) are NOT discharged.

[newbie2]

I thought it worked different then that. I'm in an active 13, and my mortgage shows IIB. I did not reaffirm and it was my understanding that I can walk away from the home at ANY time, not just during the active 13, and be liable for nothing.

No no no. See my response above to Espo. 7s and 13s are completely different. Also, there is no reaffirmation in a Chapter 13.

[espo1357]

No no no. See my response above to Espo. 7s and 13s are completely different. Also, there is no reaffirmation in a Chapter 13.

My lawyer said that I could walk anytime, during or after the BK 13.

He is the best in the city I live in (not going to tell you where).

It must be different in other areas.

The End.

[newbie2]

My lawyer said that I could walk anytime, during or after the BK 13.

He is the best in the city I live in (not going to tell you where).

It must be different in other areas.

The End.

Well then, good luck to you Espo if you decide to do that.

For anyone else who perhaps want to know what the Chapter 13 discharge includes (and doesn't live in Espos city or have his attorney) here is the word right from the horses mouth (US gov): http://www.uscourts.gov/FederalCourt...Chapter13.aspx Scroll down to read about the discharge and what it does and doesn't include.

An excerpt:

As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage)

and..

To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded.

[HHM]

I originally thought that was the case too. But, I have since learned on this board that a mortgage on a primary residence that is not paid off during the plan is not discharged (actually it may not be limited to a primary residence, I don't remember for sure). I at one point found the section of the bankruptcy code that excludes the mortgage from discharge. But I was unable to find it when looking again recently. The US Bankruptcy Court website does say "Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage)" http://www.uscourts.gov/FederalCourt...Chapter13.aspx

That is absolutely incorrect. A chapter 13 discharge is still a bankruptcy discharge and an underlying mortgage obligation IS discharged in chapter 13 (but the lien stays). You need to go to the statute and not rely on that court website that is misleading as to the issue at hand. What you are probably referring to is section 1322(b)(5) which allows for the curing of default on unsecured and secured debt.

BK code section 1328 is the discharge provision for chapter 13. In section 1328(a), it references a debt "provided for under section 1322(b)(5)" is excepted from discharge. The claim referenced under 1322(b)(5) is the arrears, not the underlying obligation. The arrears are non-dischargeable (in a sense), but the thing is, the issue never comes up because you must pay 100% of the arrears in the plan to cure the default or the lender gets the property back. It's confusing, and doesn't make a whole lot of sense.

It's unfortunate that the US Court website confuses the issue.