Question about "walking away" from our house post Ch 7 Bk

[Gwentopia]

I'm looking for tips and general knowledge about those that included their mortgage(s) in Ch 7 with intention to keep the home, did NOT reaffirm the mortgage(s) and need to "walk away" from the home anyway.

Or am I alone? I just feel like I can't be the only one who filed for Ch 7, had it discharged and hoped to keep their home but financially couldn't keep up the payments and a year after discharge will need to walk away from it anyway...

Everything I find online is for "foreclosures" which this is not. My lawyer assured me that "foreclosure" will not appear on my credit report because the mortgages were included and discharged via the Ch 7 bk.

So how does it work to "walk away"?
At what point can I be behind on the mortgage and still be able to access the property? I've been 30 and 60 days behind and I believe the magic number is 90 days, but that's starting of "foreclosure" and that's not what I'm doing here or at least I sure don't want it to become that - if that's possible (confused about that - where's the line drawn?)

Here's where I'll mention that we left the house months ago and have been renting it out, but the rental income does not even cover the 2 mortgages which is why we can't keep up with the house payments anymore. We live in another state and are renting a home currently.
I planned to keep paying the mortgages long enough to honor the lease with my tenants (up Sept 30th) and when the house is empty, we're planning a trip there in Oct with a U-haul to remove our remaining belongings.

My first thought was that after we remove our items and lock the house up one last time that that's when I'll call the lender and what? Tell them I'm exercising my right to walk away? Say I want to talk to a representative in their bk department? Do I bother mailing the keys to save them from breaking in to change the locks?
Can I just tell the electric and gas company that we want to close the accounts and are no longer responsible? How do the bills get transferred to the lender?

I just would really love clarifications of all the nitty-gritty details down to the switching of the utilities.
Because I do love my home and lived there over 7 years and am heart broken we have to give it up - especially after all the money we put back into it with renovations... I'd be willing to pay to keep the house at 45 degrees all winter if it meant not having the pipes burst (home is in CT) *if* the lender won't let us switch the utilities or doesn't ask fast enough to have it winterized...
At some point the lender will update the county records accordingly and remove us as the owners, right?

See, I worry about the things most would tell me I shouldn't have to, but I really want to know!
I'll still care about the silly house and it's outcome long after it's no longer ours.

So please, if you've utilized your right to "walk away" from your home after Ch 7 bk, how did you do it? Did you attempt to remain on the property after you stopped paying? Did you leave the property right after you stopped paying? Or did you leave the property at 30-60 days behind? Did you wait to have them evict you like in the case of foreclosure? Did you check your credit report and did it actually report "foreclosure"?

I just don't want to have to make anymore payments than I have to in order to GUARANTEE there won't be a padlock on the door when we show up in Oct to get our belongings - that's my biggest concern. Honestly I was just going to make sure that we don't hit the 90 days behind until at least Oct 10th or after. So I was planning to catch up and pay at least through June's mortgages.

Thoughts? Experiences? Advice?
THANKS!

[BCA2009]

First off, I would quit making payments now and save up that rent money you are getting. If you are current right now, I don't see how they could foreclose before Sept 30.

Bad news is you can't just "turn the house over to the bank". Once you have taken all of your stuff out you can call the bank and tell them. You can also have the utilities turned off, but you can't speed up the foreclosure. You just have to wait the the bank to decide to foreclose.

[UpaCreekinCA]

Agree with BCA2009, stop paying them and pocket the rental income to help with trip expense in Oct. It will take the bank 90 days minimum to START foreclosure. After everything is out you can contact the lender and let them know you are out and will sign it over (called Deed-in-Lieu of Foreclosure) or a Short Sale if you are upside down in it. Either method should get it back to the bank faster than a foreclosure. The lender may even pay you to walk away so they don't have to foreclose and evict and that you don't trash the place.

[kw1025]

The bank has to do a lengthy process, especially if you live in a "judicial" state. It is LONG after the papers have been served to you, that you will actually have a padlock. You will know in PLENTY of advance. I have been in your situation, and it has been a year, and sttill not even close....hope that helps

[Gwentopia]

Hmmm... OK.... well I'm already 30-60 days behind (30 on 1st mortgage, 60 on 2nd) so I guess I'll get it current to June's payments and I should be safe for Oct... I guess I'll pay attention to the various threatening letters I get and make sure I won't hit 90 days.

So really, even with my right to walk away they *still* foreclose? Hope that doesn't mean I will have foreclosure on my credit report after all!

I will be able to save Aug + Sep rental income and that will be plenty to cover a moving truck and travel expense to get our stuff.

My lender is GMAC. On their site it clearly states we cannot to Deed in Lieu without trying every other option first and one of those is Short Sale. However we are not allowed Short Sale (at least not with any new legislation protection and speediness) because the home is not our "primary residence". Unfortunately because we opted to rent the home out it is deemed an "income property" and excludes us from basically all programs out there.

I would let them know not to bother coming after me for the money as the Ch 7 bk is my defense (as my lawyer says) and I'm saving them the money of having to evict me - you'd think then that the process would be quicker or more straight forward.
I'm starting to think I should tell the lender what's going on JUST PRIOR to us moving out the rest of our possessions... in case they do offer us something to leave as is... Otherwise we were planning to take the fridge and even the dishwasher... I'd really regret taking those items out if my lender attempts a deal and asks that we leave them after we've already removed them!

Decisions, decisions...
Thanks for your responses.

[newbie2]

So really, even with my right to walk away they *still* foreclose? Hope that doesn't mean I will have foreclosure on my credit report after all!



I would let them know not to bother coming after me for the money as the Ch 7 bk is my defense (as my lawyer says) and I'm saving them the money of having to evict me - you'd think then that the process would be quicker or more straight forward.
I'm starting to think I should tell the lender what's going on JUST PRIOR to us moving out the rest of our possessions... in case they do offer us something to leave as is... Otherwise we were planning to take the fridge and even the dishwasher... I'd really regret taking those items out if my lender attempts a deal and asks that we leave them after we've already removed them!

Decisions, decisions...
Thanks for your responses.

Yes, the bank still has to follow legal guidelines in order to take possession of the house (foreclosure). Your note was distinguished in bankruptcy, not the mortgage. (The Note is the "promise to pay". The Mortgage is the instrument that puts the lien on the home.)

They won't come after you for payment, as they know you have no obligation to pay the note any longer. You will however receive all the formal notices of foreclosure through the process as that is guided by your states foreclosure laws.

Good luck to you.

[BCA2009]

Hmmm... OK.... well I'm already 30-60 days behind (30 on 1st mortgage, 60 on 2nd) so I guess I'll get it current to June's payments and I should be safe for Oct... I guess I'll pay attention to the various threatening letters I get and make sure I won't hit 90 days.

So really, even with my right to walk away they *still* foreclose? Hope that doesn't mean I will have foreclosure on my credit report after all!

I will be able to save Aug + Sep rental income and that will be plenty to cover a moving truck and travel expense to get our stuff.

My lender is GMAC. On their site it clearly states we cannot to Deed in Lieu without trying every other option first and one of those is Short Sale. However we are not allowed Short Sale (at least not with any new legislation protection and speediness) because the home is not our "primary residence". Unfortunately because we opted to rent the home out it is deemed an "income property" and excludes us from basically all programs out there.

I would let them know not to bother coming after me for the money as the Ch 7 bk is my defense (as my lawyer says) and I'm saving them the money of having to evict me - you'd think then that the process would be quicker or more straight forward.
I'm starting to think I should tell the lender what's going on JUST PRIOR to us moving out the rest of our possessions... in case they do offer us something to leave as is... Otherwise we were planning to take the fridge and even the dishwasher... I'd really regret taking those items out if my lender attempts a deal and asks that we leave them after we've already removed them!

Decisions, decisions...
Thanks for your responses.

You can do what ever you want that makes you feel comfortable, but if it were me, I wouldn't waste anymore money on payments. Even if you are already 60 days behind, if you haven't received any notice about foreclosure yet, they can't get it done by Sept 30.

What state are you in? That will help us give you more info on the foreclosure timeline.

And your are pretty much wasting your time looking for a short sale. Because there are two notes involved, it would take months to get it approved by both banks, even if you had a buyer lined up. Which means you have to clean it up, list it , show it, etc.

A DIL is possible, but unlikely also. Never hurts to ask, but with two notes involved, the second would have to agree to give up any rights to their lien, and then you sign it over to the first (and the first agrees to sign it). Alot of paperwork that will have to be written up by a attorney. The banks are not going to pay for it and I assume you don't won't to spend that with no guarantee that the banks will sign it after you send it all in to them. Logistically, it's just not going to happen.

Stop paying, collect all the rent you can and wait for them to foreclose.

Good Luck!

[majicman50]

I agree with what you said newbie2. I am about to stop paying 8 mo's after BK. I'm so underwater (181% LTV) there is no help out there. Only thing is that when I checked into timelines for MO foreclosures it said 3 months. I assume that is after notice is served. Is this a realistic expectation? I hear all kinds of stories of people having 1 to 2 years. Who really knows approximately how long....

[Gwentopia]

To clarify, my home is in Connecticut.
My first mortgage is paid up until May's payment, and 2nd mortgage last paid in April... so, already 30 and 60 days behind... I'm pretty sure if I don't pay 2nd mortgage for May's payment soon, I will hit 90 days by August.
I can't risk that GMAC won't be miraculously quick to padlock my home.

Does anyone know if they can start foreclosure based on just the 2nd mortgage being behind if the 1st mortgage is not also behind 90 days as well? Just wondering if paying one to be current but not the other is possible... or an option.

So please clarify the note vs mortgage for me... if they foreclose anyway and just can't collect, then why is my lawyer telling me I will NOT have 'foreclosure' on my credit report? Or is that still true anyway? I don't understand how to avoid it on my credit report if GMAC does in fact foreclose... do they just not report it under these bk circumstances?

[1967]

I'm sure others will correct me if I'm wrong but here is my thought.

They souldn't be able to come and padelock your home that quick.

First they have to foreclose.

Second you must have a waiting period after the foreclosure that will give you time.

Third, it needs to get sold because you still hold the title to the house.

fourth, many states have eviction laws. This should also be able to give you time.

Am I right on this?......Anybody????

[Gwentopia]

If they foreclose prior to selling the home, it is not deemed/the same as a "short sale", correct?

If we did do short sale (instead of foreclosure), we would have significant tax issues because the home is an "income property", so I have no intention of taking the short sale route... they'd have to attempt to sell it after I walk away/they foreclose...

Plus, if not for tax/closing cost/realtor fees, the bank can get their money... we owe in total about $159,900 and the house is worth about $163,500... just too close for us to sell ourselves... and plus, well... we'd need a buyer... which are few and between since our house has some significant drawbacks (close to busy road, limited yard space) even though the inside is beautiful. We tried selling back in 2008 with no offers in 6 months, which is another reason I wouldn't bother again...

Also, I'm not living in the home... just my renters who will have to move out Sept 30th when their lease is up... so no eviction necessary for anyone. I'd love to get some "free living" out of the house, but I live in SC now, so that's a distance to go.

[Gwentopia]

Holy crap... GMAC's ears must have been burning... they just called me out of the blue and reduced our 2nd mortgage rate of 14.35% to 5%!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Not only that, but we'd be brought current and no fees and after our initial contribution of the new payment in July, we don't start owing the monthly payment until Sept 1st, which gives us a month to save money.
I asked and asked again until the representative talked to a supervisor to confirm that us signing a modification for the loan is NOT the same as reaffirming, so I felt better about that...
who knows, maybe now we can swing these payments.

[BCA2009]

Holy crap... GMAC's ears must have been burning... they just called me out of the blue and reduced our 2nd mortgage rate of 14.35% to 5%!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Not only that, but we'd be brought current and no fees and after our initial contribution of the new payment in July, we don't start owing the monthly payment until Sept 1st, which gives us a month to save money.
I asked and asked again until the representative talked to a supervisor to confirm that us signing a modification for the loan is NOT the same as reaffirming, so I felt better about that...
who knows, maybe now we can swing these payments.

Why do you want to keep making payments on a property that is not in the same town as you and is worth less than you owe on it?

Did I understand you correctly that you have already filed BK?

If so, why is GMAC calling you unsolicited to make any kind of payment plans. Sounds like they are trying to collect a discharged debt to me. That might be a violation of some sort. Maybe somebody else will chime in.

[majicman50]

Escrow withdrawl

Has anyone doing a "walk away" tried or even considered taking their money out of escrow before they got behind? Will the fact that we are discharged from the chapter 7 be an issue?

[kw1025]

to mess around with your escrow, i am pretty sure the chap 7 case must be closed, not just discharged

Also, regarding the foreslosure issue. Dont be nice to the bank. Offer them a deed in leiu IF they pay you. I asked for $1000. That $1000 they pay you will save them tens of thousands in foreclosure fees