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jimgreaterdaytona · Joined: 20 Oct 2009 Posts: 1 1.43 Dollars($)

We have 2 rentals and a primary residence (all in Florida). We're current on everything at the moment and have great credit. We don't want to give up our hard erned credit score or the credit cards for that matter. Problem is renters have recently moved out and left both houses in ruins which will cost thousands to repair. Also rents have fallen so much we can't charge enough rent to cover the mortgages and still pay for our primary residence. So we can't rent them, fix, or afford them no matter what. We've considered walking away from both rentals or filing chapter 13. We have to do one or the other, what's best?

Posted: Tue Oct 20, 2009 7:46 pm Post subject:

Bankruptcy. It's the only way you can legally minimize your obligation, and hopefully, walk away from or gravely reduce your tax liability.

thewretched02 · Joined: 23 Jun 2009 Posts: 115 23.92 Dollars($)

Any chance you could sell the properties instead? If so you might find this is a far better option even if you have to sell them for less than you might like.

Another option might be a cash out refinance on your residential property if you have equity in it - use the cash to either fund mortgage payments or repairs on the rentals.

Personally I was absolutely staggered when I first heard about "walking away" as an option in the US. This simply doesn't exist in other parts of the world - if you can't pay your loan they will sell the property and if there is insufficient funds to satisfy the debt you need to find the balance elsewhere.

jameshogg · Posted: Tue Oct 20, 2009 8:19 pm Post subject:

Hi jimgreaterdaytona,

If you walkaway from the property, then the lender would foreclose both the properties which would have a bad effect on your credit report and you would also be responsible to pay off the deficient amount to the lender. I don't think Chapter 13 bankruptcy would help you much. You won't be able to sell off the properties in Chapter 13. Rather the lender would give you a payment plan to pay off the dues within 3-5 years.

You can try to sell off the properties through a deed in lieu of foreclosure. Though it will affect your credit report and reduce your score by 250 points, you won't be liable to pay off the deficient amount to the lender. He will forgive the balance amount.

Thanks

Guest

Thanks to all for responding, but I'm still confused. Does chapter 13 resolve the issues with the 2 houses, or am I still stuck paying them off? If I could afford to do that, I wouldn't need to file bankruptcy. Selling them is unlikely too since they're both worth 30% less than I owe, and I would still go broke while they sat on the market. (Hope I'm responding to this the correct way too...)
Thanks,
Jim

jameshogg · Posted: Fri Oct 23, 2009 10:28 pm Post subject:

Hi jimgreaterdaytona,

Chapter 13 helps you in reorganizing the debts. The lender would give you payment plans to pay off the dues. You will not have to surrender the property to the lender. If you want to surrender the property, then Chapter 7 would be a better option for you. If you do not reaffirm the loans and surrender the property to the lender, he would foreclose them and sell it off to recover his dues.

Thanks

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BK vs Walking away