Just sign over deed of trust and walk away?

[OutOfMyMind]

Hi all! I'm new...first post. I'll try no to be too lenghty with our story. Anybody ever sign their deed of trust over to a bank? What does that exactly mean?

My husband and I are about to file chapter 7. We had to close our business after trying as long as we could to turn it around. We got behind on lots of bills personally signed for and a large credit line that was secured by a commerical building we owned with some equity. It is financed by the same bank as our credit line. That bank also wanted us to sign additional security by using our home. Did not want to, but our atty (not the bk atty) said it would show we really wanted to pay our debt and they would never come after the house since we owed so much on two other mortages. The bank also said that "they would work with us."

Hired a bankruptcy atty to look at our situation. We put up the commerical building for sale. It had enough equity to pay at least the bank back. Last tenants' lease ran out and we were making that payment too. Also put up our house for sale, about enough equity to pay a realtor's fee.

We sold all of our inventory at work to pay on the business equity line. We really thought we were getting a contract on the building...so we did not make Nov. payment on the building yet. During the grace period before it would be late, we received a letter of foreclosure. Our atty called the bank and got "we will work with you," everything seemed ok. Noticed in the newspaper 3 days later foreclosure sale scheduled for Dec. 27.

Our atty said not to give another penny to the bank; they are leaving you no choice but BK everything. He suggested we sign over the deed of trust on our house to the bank too. Stop paying house payments and find a rental and move. Would the bank have to pay the first and second on our house? Would we get a little time to find a house? If it is like the building, we would only have a couple of weeks. We have school aged children!

I am so blown away by this. Can't eat or sleep. Cry all the time! If we sold the building, most of the debt would be paid off! Public auction may get payoff.

[HHM]

Let's see if I understand the situation...you essentially have 3 mortgages, correct?
The first two mortgages are probably from when you purchased the house, but the third is when you signed over your house as security for business debt, correct? And it is this 3rd mortgage that is trying to foreclose, right? What a bummer of a situation, but you will get through it.

Ok, your Bk attorney is probably giving you good advice, don't throw good money after bad by continuing to pay on the house if its a foregone conclusion that you can't stay in it. The 3rd mortgage, if they foreclose, would have to pay off the 1st and the 2nd before they get paid. As for signing over the deed, it is called a "deed in lieu of foreclosure". You can do this, but the bank has to agree to accept it, most don't anymore for whatever reason. Also, it short circuits your time line, If you sign over the deed, you generally have to move out pretty quick (i.e. the same day)because you no longer have any claim to the house. If you let the home go to foreclosure, you at least have that time to look for a new place, etc. Also, it sounds like the bank has already started foreclosure, so you receive no benefit on your credit report from doing a "deed in lieu" at this point.

Also, you can stop the foreclosure in its tracks if you get your petition filed, ASAP.

[OutOfMyMind]

The commerical building only has one mortage. It is being foreclosed on. We asked about stopping the foreclosure but the atty said without a contract you really don't have equity to bargain with. The interested party is trying to get pre-approval for a business loan but could take time.

Our house is up to date on payments. I think our atty is trying to get across to me is they really do not want to work with us. Don't be surprised if the house is next on the their list to take.

Thanks for your reply. At least, I understand if the bank was to accept our deed of trust, we better be packed. I don't think I am ready for that yet. We plan to file mid January.

[Spartan]

HHM is right on.

Seems like the bank tries to screw with you instead of "working with you". Well, you can return the favour by filing ASAP, and put them on ice.

Unless you sign the deed over, which is unlikely to be to your advantage, you don't need to worry about moving before Summer is over.


Now, you do need to get yourself together. Get physically active. Exercise and eat well. You can't let your physical health go. It isn't worthy. You got to be strong so you can fight this and come out ahead. You should be getting ready to do battle!! And your kids need you to win this!

Don't worry too much. You can win this. Things will be different. But looking beyond the valley, there is a good future for you and your family.

[lisac77]

Thank you for posting this!!! We are also in the process of preparing to file bankruptcy due to a business failure. My husband thought that he could try and work something out with the bank so that he could keep the business running (interest-only payment plan, etc) for a few months while we tried to sell it. I have been trying to convince him that this isn't a good idea, and now I see why - the bank, even if they say they wiill "work with us" is really under no obligation to do so.

He is already 2 months behind in paying the small business loan, and 1 month behind on the big business loan (the one we have to worry about - our atty describes it as "the bear breathing down our necks"), with no money to pay either loan in the coming months.

Anyway, your story has helped me in that I now know that we just need to cut this line and file, and that dragging it out isn't going to help anyone.

I'm sorry things didn't work out for you. Hope things are better down the line.

[OutOfMyMind]

lisac77, good luck. If it cannot be salvaged...don't. Interest only can still be tens of thousands of dollars. Utilities, insurance, taxes, etc. add up to huge operating expenses when you aren't making it. We put in our personal savings to keep going and now it is all gone. We never imagined starting over again. Learned alot too.

I'm so thankful for this forum. I actually feel stronger than I have in 2 months.
We are not going to give the bank our deed. Will find a nice home to rent and will be back better than ever. We live in a small town where everyone knows us and I'm not going to care what people say anymore. I see now it happens to the best of us.

Just curious, how bad does your credit rating go down? Ours was 800+. I also see where many take a long time to discharge. Our atty said about 3 months. Does that seem about right?

[lisac77]

OutOfMyMind, I was wondering about the credit thing, too. Both of our credit ratings are in the 700-800 range. We've always had good credit. This business thing was a risk that will unfortunatelyy affect our credit for a while. But it's not forever, and it's just a number. Hopefully we'll be able to keep our house, but if we can't it's not the end of the world.

I completely agree with you about not putting any more into a failing business. DH is having a hard time, he's the one who put his heart and soul into it and now it's going away. Fortunately he is not willing to spend his own money to pay for business stuff. I think we'll be fine if he accepts the fact that we will be filing next month or the month after.

Best of luck to you. I think everything will be fine. Think long term, not short term... this may be a great benefit to you in the long run.

[Jerry Hodge]

What state are you located in?

[OutOfMyMind]

We live in Tennessee. The real estate agent called today and thinks we may get a contract from a couple that have looked at the house twice. Do I tell her what is going on yet? Really don't know how much I need to tell her. We are still up to date on our house payments. I have not made Jan. payment yet.