Considering Chpt 7 even with house equity...yes? no?

[KevFinnerty]

I have been going round in circles as to whether bk is the right thing or not. Now I am back to thinking maybe it is.

Basically:

- Lost my source of income about 4 months ago; unable to find job since then & things have fallen apart rather quickly

- I own a house with about 75k left on the mortgage

- My mortgage is almost 3 months in arrears & will go into foreclosure end of this month

- My house has equity in it - homes like mine are listing for around 180-200k (but I don't know if any are moving)

- I owe about 110k in unsecured debt; most of that is now delinquent for 3 months and could escalate into lawsuits



At first I thought maybe I could quickly sell my house, try to recover some equity then settle with CCs, but I really don't think that is going to work. I did not allow myself enough time. The housing market sucks. I can't put anything into making the house attractive to buyers, it is definitely not a house worth "showing". House status going into foreclosure/lis pendens will kill sale possibilities even more. Doubtful I will sell at anything near what I need in the end to even be able to settle all my debts, even if lucky enough to sell. Trying to sell the house could take weeks if not months if ever, or more likely will only go to highest bidder at foreclosure auction.


So if I file for Chpt 7 (probably not able to until after foreclosure has started) then I'm thinking at least that way I can get my debts done with and end up at least with the 20k federal housing exemption to start my life over with. And maybe even keep a few of my possessions too.

But there is so much I don't understand or hearing different things about depending on what I read or who I talk to.

- I read somewhere that if foreclosure starts & I file Ch7 supposedly the mrtgage company will file to lift the stay & they will have their motion granted & foreclose anyway?? Is that right? How can that be? Aren't they another creditor that should be in line for their chunk after trustee takes the house??

- If trustee takes my house (or rather when trustee takes my house, provided the foreclosure can be stopped by the Chpt 7), how does that work as far as selling it??? How does he do that? How much time would I get in this process to move out???

Thanks for this great forum, I have learned so much (but bk & all this is so complicated every time I think I know what is what I learn something else to confuse the hell out of me or change my mind as to what I should do).

[mrskal]

Have you looked into HEMAP yet?
Here is a link to a timeline, not sure how current it is.

http://www.afscanhelp.com/timeline.cfm

[KevFinnerty]

Have you looked into HEMAP yet?
Here is a link to a timeline, not sure how current it is.
http://www.afscanhelp.com/timeline.cfm

I guess I don't understand. I have no money - I have no job - I can't pay the mortgage - I have unmanageable & delinquent CC debt - how can I buy my house back?

[mrskal]

The HEMAP program is for help on your mortgage when you are unemployed.
This is in the state PA. ( that is where you live right?)
There is a bill for a nationwide program that is the same or similar that is supposed to go into effect Oct 1.
Here is the link, you need to read through it to see if you qualify.

http://www.phfa.org/consumers/homeowners/hemap.aspx

If you qualify, it may help you keep the house out of foreclosure now.

[Pandora]

I guess I don't understand. I have no money - I have no job - I can't pay the mortgage - I have unmanageable & delinquent CC debt - how can I buy my house back?

The question becomes, even if you file for BK - how do you plan on supporting yourself following? Is there no job anywhere you could work - even part time or even at McDonalds or something to bring in SOME sort of money? How about unemployment - do you qualify for it?

If you cannot pay your mortgage now, excluding any other debts and even utilities since you have no income, then you need to seriously look at letting your house go, as even if you file BK, you have no way to even "pay and stay" and with all that equity in it, the trustee just may take it anyway.

[momofthree]

Why don't you just sell the home for whatever you can get for it and then live off of that money? Without a job or real estate, you're judgment proof (creditors can't do anything to you), as long as you keep your money out of the bank.

With a house worth an estimated $180k, you should be able to sell very quickly for $120k-$140k, which would give you a very nice chunk of money to live on until you find a job. But even if you had to take $100k (doubtful), you'd still come out ahead of just letting the bank foreclose.

If you file bk and the trustee takes the house. I believe the procedure is to sell the house, pay any fees involved in selling, give you any homestead exemption amount (Pennsylvania has $0 homestead exemption, but you could use federal for around $21k), and then distribute the rest to unsecured creditors. If you sell it yourself, there is a good chance you would get more than the $21k you'd get thru bk. ((Check with an attorney on this, as it's just what I understand from what I've read. I didn't personally deal with this, so I don't have personal experience))

Often, if you tell your mortgage lender that you're putting it on the market and provide a contract with your realtor as proof, they will put off foreclosure. They don't want to have to pay the selling costs if they don't have to...

[coak1875]

Hello Pandora,

I see you had your 2nd Mortgage stripped can you go more in detail about that please?

[KevFinnerty]

The question becomes, even if you file for BK - how do you plan on supporting yourself following? Is there no job anywhere you could work - even part time or even at McDonalds or something to bring in SOME sort of money? How about unemployment - do you qualify for it?

If you cannot pay your mortgage now, excluding any other debts and even utilities since you have no income, then you need to seriously look at letting your house go, as even if you file BK, you have no way to even "pay and stay" and with all that equity in it, the trustee just may take it anyway.

Yes, I have given up keeping the house. I am just trying to figure out the best way forward, the best way to lose it and wipe out all my debts at the same time.

I intend on moving in with a relative then rebuilding my life over from there so I won't have any bills and can afford to live on something like a low paying crappy job for a time until something real comes along (if ever). I want to straighten out the house/living situation. I may still just take a "you want fries with that?" job in the meantime though just to hold out.

I do not qualify for any unemployment because of the nature of the arrangements of my last job - I was not being "paid" per se. It was a startup company that a friend got me involved with. He was "loaning/giving" me money to stay afloat intending to get paid back from profits when things took off, then from there hopefully I would actually be getting a real salary and commissions and whatnot. We were supposed to become millionaires. But he ended up having his own $$ problems and I found myself quickly with no $$ coming in. It is a long story.

[Pandora]

Hello Pandora,

I see you had your 2nd Mortgage stripped can you go more in detail about that please?

It hasnt been stripped yet - we're in the process of doing so, a l-o-n-g arduous process We had to file an AP to strip and so far, the 2nd is contesting everything, which is where we are right now - heading for court in September to have the judge decide. Wont be confirmed until the AP is settled. Hopefully our lawyer is on his game and has contacted the 2nd's attorney as he said he would today to try to get them to see the error of their ways in their BPO vs. our certified appraisal .

If you need to know more about how stripping a 2nd off works, there are many posts regarding it as well as a Sticky


KevFinnerty - here's hoping that whatever you decide to do, you will be better off at the end of it than you are now and will remain that way. Wishing you the best.

[KevFinnerty]

Thanks mom but - here's what I'm thinking...

Why don't you just sell the home for whatever you can get for it and then live off of that money? Without a job or real estate, you're judgment proof (creditors can't do anything to you), as long as you keep your money out of the bank.

With a house worth an estimated $180k, you should be able to sell very quickly for $120k-$140k, which would give you a very nice chunk of money to live on until you find a job. But even if you had to take $100k (doubtful), you'd still come out ahead of just letting the bank foreclose.

I'm afraid that my house is not going to sell fast enough - or not at all - or not for enough $$ - especially with lis pendens on it soon, plus the fact that I can't fix it up to make it "showable" like most houses - or if it did sell that I'd to be able to settle with all the creditors afterwards. If I sold it for 120k I would only have like 40k left over to settle with the CCs, and I don't know if I would even have enough there to settle with the creditors at like 40% on the dollar. Plus add to that fact that the CCs may put liens on my house b4 it sells thus getting their full amounts, leaving me no way to even settle with everybody. Plus add to that that my bank accounts could be frozen too making it even worse, all kinds of really tough stuff to deal with.

Plus I am also thinking of the future that for the sake of argument say I was able to sell the house for enough to settle with all the creditors for some reduced %, then next year I would be stuck with all that forgiven $$ as income added to my taxes & but then unable to pay that. It just seems like there is too much to contend with going that way. But like I said I am going in circles as to what is the best way to proceed. I screwed myself by waiting too long to confront my problems is also a big part of this. If I had woke up and put the house on the market as soon as my $$ stopped coming in, b4 foreclosure was on the horizon, things would have been so much easier and straightforward.

If you file bk and the trustee takes the house. I believe the procedure is to sell the house, pay any fees involved in selling, give you any homestead exemption amount (Pennsylvania has $0 homestead exemption, but you could use federal for around $21k), and then distribute the rest to unsecured creditors. If you sell it yourself, there is a good chance you would get more than the $21k you'd get thru bk. ((Check with an attorney on this, as it's just what I understand from what I've read. I didn't personally deal with this, so I don't have personal experience))

Right, if I go the bk route, I'm thinking at least then I have 20k regardless of what they are able to sell the house for (and it is not my problem trying to sell it in this horrible market), have all my debts wiped out, no worries on my end about trying to sell the house and seeing it not go, or not getting enough $$ for it to pay other creditors etc.

I don't know if that is the best approach or not though, or even if it would work, but right now it seems like the best shot I have at getting through this, coming out with something to live on (20k), and being debt free to start over. But I may be missing something. Maybe my bk will be denied or whatever they call it. I've gotten some free initial consult type legal advice but I can't afford to retain the attorney. I'm trying to talk to free "legalaid" people too but I'm afraid I will get what I pay for with them (free advice/free filing/lousy work). That is how I am proceeding now though.

Often, if you tell your mortgage lender that you're putting it on the market and provide a contract with your realtor as proof, they will put off foreclosure. They don't want to have to pay the selling costs if they don't have to...

Yeah, I tried asking them that (twice) but they said "no" both times. I guess since there is so much equity in the house they have nothing to lose by waiting, they could make money by taking the house and selling it themselves in 3 months for $100k than letting me try to sell it at $180k, 170k, 150k, 140k, 120k, or anything more than their mortgage amount. In my case I think they want to go to foreclosure, rather than have things drag on as I try to sell it (in case I can't sell it) plus the factor that they can make a profit easily selling it themselves (they could sell it for $80k and make 5k if they wanted to).

[KevFinnerty]

KevFinnerty - here's hoping that whatever you decide to do, you will be better off at the end of it than you are now and will remain that way. Wishing you the best.

Thanks.

And I just want to take time to thank everybody for all their posts/ideas/discussions/everything. This is a great forum. It is too bad that we all haven't met under better circumstances. Best of luck to everybody.

And something else - something I am having a hard time with - is the whole "shame" factor in all of this. Not being able to pay my bills. Not being able to pay back loans. I can't believe my life ended up like this. It is tough coping with that as well as all the other pressures too.

[Pandora]

...

And something else - something I am having a hard time with - is the whole "shame" factor in all of this. Not being able to pay my bills. Not being able to pay back loans. I can't believe my life ended up like this. It is tough coping with that as well as all the other pressures too.

Kev - none of us expected to be here in our lives, but for whatever reason, we are. My mom told me a while ago "you're where you're supposed to be - for whatever reason, and what happens is meant to."

Ya know - Momma's are pretty smart cookies methinks ;) There is no shame - life happens, things out of our control happen, and we move on. Or at least its how I've been looking at all of this.

[helpinNE]

Kev - I will give you my 2 cents.
I would file chapt 7 bk and give the trustee the house to sell. At best, you are giving up $20 - $30k of equity that you cannot get out right now due to the housing market (not your doing) in exchange you get to flush $110k in unsecured debt.
Do it now, while you have no income and start fresh.
Your credit score it going to be trashed either way, by settlement or by BK. Get it done in one big swoop. Take a deep breath and move on.
There is life after BK, I am living it. A FICO is nothing more than a number.

[KevFinnerty]

The HEMAP program is for help on your mortgage when you are unemployed.
This is in the state PA. ( that is where you live right?)
There is a bill for a nationwide program that is the same or similar that is supposed to go into effect Oct 1.
Here is the link, you need to read through it to see if you qualify.

http://www.phfa.org/consumers/homeowners/hemap.aspx

If you qualify, it may help you keep the house out of foreclosure now.

I wanted to comment on this again - THANKS for that info. I don't qualify because of lack of income issues, thus I ruled it out when I already looked into it, but talking yesterday to an attorney (free legal aid thing) he URGED me to make an appt with HEMAP anyway, BECAUSE just doing that puts a temporary hold on the bank's foreclosure process. I felt awkward about doing that and spoke with the HEMAP people, and they said to come in anyways, that many people who don't qualify use the application process solely to delay things. So I did that. Am holding my breath to see what happens next.