Heads-up for those surrendering homes through BK

[Help!]

I was thinking this morning about those who stand where my husband and I stood eight months ago, filing Ch. 7 and letting go of our home through BK. Our attorney made it sound very simple, but there are some things he neglected to tell us.

You want to give your house back to the bank, the bank wants to take it from you since they have a lien against it... you're filing bankruptcy and all that's left to do is hand over the keys, right? This is how we thought it would work.

When you file Ch. 7 and indicate that you intend to surrender the home, it is common for the lender's attorney to file a motion for relief from stay to begin the legal process of taking possession of the home (assuming you've stopped paying your mortgage). This is the process of judicial foreclosure, and it will happen whether you are discharged or not.

You may be alarmed (as we were) to receive some very intimidating court documents in the mail listing the lender as "plaintiff" and you as "defendant". Although it can make you feel as though you are being convicted of a crime, you are essentially being sued by the lender for the deed to your home. Don't panic! The lender is not coming after you for the loan(s)... they are simply going through the proper legal channels to have the deed transferred to them so the property can be sold.

One option to consider if you wish to accelerate getting the property transferred back to the lender is to contact their attorney immediately after your discharge and let them know you are willing to transfer the deed to them through a non-judicial foreclosure (a "deed-in-lieu"). Our lender's attorney sent us one form to sign, the deed was transferred, the lawsuit dropped and the home sold within a month. It saves the lender thousands in legal fees and enables the house to be sold quickly instead of sitting vacant for a year or more.

Even though we knew we weren't responsible for the loans, we desperately wanted finality - and this was a nagging loose end waiting to be tied.

Hope this helps those of you who are right behind us (and unfortunately, there will be many the way things are going). Good luck!

[Teddy]

I just sent in paperwork to CitiMortgage requesting a DIL - I had filed BK in March with intent to reaffirm my home, but I never did. Since then, we have moved into another house which our friend sold us dirt cheap, so I have quit making my mortgage payments.

I haven't received any official foreclosure papers since I just missed my 3rd payment this month.

I got a letter stating that they received my request and that it's possible I'll be contacted by a realtor or someone to access the value of my property.

I want it done too, I hope they accept the DIL -my house is move in condition, not trashed or anything. I just want to be out from under it - for now, it's up for sale and I'm paying utilities.

Thanks for the advice!

[B65]

thanks for posting..

How was it getting a rental afterwards and how long after foreclosure are you able to buy a house again? I feel our mortgage payment is too high and when the bankruptcy hopefully will be discharged we may just let it go and try to find a rental around 900 bucks a month cheaper than the mortgage, we only bought it 2 years ago and has a ton of negative equity as we speak... I am just worried about getting a decent rental and maybe getting qualified for buying another house one day... also we would like to stay in the same area and i think everyone knows your business with a forclosure.. that worries me too... My daughter at the school and all that... people talk..lol.

B

[Help!]

Our situation is different in that we moved to another state before we had any idea that we would become upside down in our house and have to file BK. Our credit was perfect at the time, so I can't answer your question about how hard it is to find a rental with bad credit. We're saving as much money up as we can in case we can't renew our current lease. I'm completely over the embarrassment of bankruptcy and foreclosure at this point. I openly discuss it with people knowing that for every family like ours who has been through BK there are probably 10 more living on the edge and just a pay cut away from doing the same. I refuse to give BK that power over me.

[TEW]

there is something else that can be done to speed it up. So far I have not been able to get that done. that is to sign a consent to judgment. I have a second on the house so i can not do a DIL.

[wonkettegirl]

thank you for posting this. I just received my motion to lift the stay and, yes, it is intimidating. I'm not sure what will happen, but I do intend to surrender my home in the bankruptcy and (I hope) eliminate the deficiency between what I owe on the home and what it will sell for at the foreclosure auction.

I do have a question in this regard: the bk listed my mortgage holder (first & second mortgages; same bank) as creditors and the amounts still owed on the mortgages. But what if, in selling the house, they incur more costs? Like the costs of cleanout, maybe some repairs, listing costs, etc.? Are those discharged, as well?

[Help!]

thank you for posting this. I just received my motion to lift the stay and, yes, it is intimidating. I'm not sure what will happen, but I do intend to surrender my home in the bankruptcy and (I hope) eliminate the deficiency between what I owe on the home and what it will sell for at the foreclosure auction.

I do have a question in this regard: the bk listed my mortgage holder (first & second mortgages; same bank) as creditors and the amounts still owed on the mortgages. But what if, in selling the house, they incur more costs? Like the costs of cleanout, maybe some repairs, listing costs, etc.? Are those discharged, as well?

Yes. For example, if you no longer carry homeowner's insurance and the lender secures their own insurance on the property theirs costs are rolled into the loan (which you will no longer have any liability for after discharge).

[limage]

I spoke with my attorney today about surrendering my home via my bk and then staying in it until I am ready to go (he said it might take 12 months). I just want my bk to be discharged before I move. Since it is a condo, I have to pay 550 a month in condo association fees, which he said I need to keep paying. He said I will not be able to do a deed in lieu, that the lender will HAVE to foreclose because of the second lien. I don't know if its true, but I am certain he has dealt with it before. I stopped paying my mortgages this month and I am filing in February.

[Woah]

We are surrendering our house. Our 341 is Dec. 9 and we are hoping the trustee wants to try and sell it. He may be able to. Otherwise we don't get any homestead exemption. It's so hard not knowing how soon we will have to vacate. That is the worst part of this whole thing for me. I like to have things planned out.

What are you supposed to do about homeowner insurance? When is it ok to stop paying that? Can you stop sooner if you send the keys back?

[yeahdischarged]

We tried to keep our home, and although did not reaffirm, we kept making payments. When we found out we were being relocated to another state, we found out we had significant negative equity and could not sell. We stopped making payments and notified the bank. It was 5 months before they initiated foreclosure proceedings and 8 months before the sheriff's sale.

We had offered a Deed in Lieu, but they were not interested. Crazy! (If you have a second mortgage, Deed in Lieu's are most often not possible, FYI.)

We had no further liability on the house, we never had a second "public record" entered for the foreclosure (although many people warn about that - I always thought that was strange, because if the home is discharged in BK and yet you continue to make payments, how can they enter a later public record for foreclosure on a home you have no legal liability for? just wonderin.......), and the entry on our credit reports never changed - just says "IIB - included in bankruptcy" as it has since we filed.