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Posted: Tue Aug 18, 2009 6:24 am Post subject: Bankruptcy & Foreclosure

I have a former primary residence which converted into a rental about 2 years ago when we moved abroad. Ever since i lost my tenenats, my mortgage payments have gone down hill. There is absolutely no equity due a refi during the boom.

I am considering bankruptcy since firstly, I cannot afford the payments and since there is no equity in the foreseeable future.

When in bankruptcy, does the trustee handle to the sale? Is that considered foreclosure? Do I need to be involved with the selling process or can I just walk away, if qualified for CH7. What about deed-in-lieu of title? Does it lessen the hit while in bankruptcy?

Thanks for all your advice!

jerry · Posted: Tue Aug 18, 2009 6:47 am Post subject:

Hi Guest,

If you file bankruptcy, there will be an automatic stay on your property which means your lender will not be able to foreclose on your property. The court will check what assets you have, which can be sold to pay off your creditors. Foreclosure procedure will start only when you get a discharge from the bankruptcy.

If you are planning to let go of the property, I think you should go for a deed in lieu of foreclosure. You can sign over the property title to the lender so they can foreclose on the property and satisfy the loan amount. As there's no equity in your property and it is upside down, there will be a deficiency. In a deed in lieu, you could be forgiven this deficiency amount. The effect it will have on your credit is almost same as a foreclosure or a bankruptcy. You will have to wait for at least 2 years in order to qualify for a new loan after the deed in lieu. This waiting period would be same even if you file a bankruptcy instead of deed in lieu.

Thanks,

Jerry

Posted: Tue Aug 18, 2009 9:26 am Post subject:

Thanks Jerry,

I contacted the lender and their requirements for the DIL is that I have to short sell my property for 90 days through professional means. Then, I can apply for the DIL. There will be a reveiw process which they will try to see my reasons for the DIL is legit and I have a permanent hardship.

In regards, to the short sale, I a 100% sure there will be a deficiency amount. I am assuming that the lender that pursue this and get a judgement. Should I file BK first to get the auto stay?

As you mentioned above, the waiting period will be the same and my credit will tannk for the years to come....

adonis · Posted: Tue Aug 18, 2009 10:23 pm Post subject:

Hi Guest,

You can file bankruptcy to get an automatic stay. But in my opinion, it would be better if you could negotiate with your lender and check if he can forgive the deficient amount. A bankruptcy would severely affect your credit report and will remain on it for 7 years. It's better to avoid bankruptcy and negotiate with the lender.

devidas_padir · Joined: 01 Mar 2009 Posts: 49 6.41 Dollars($)

For many such reasons, deed in lieu is a good option, for whatever procedure you have mentioned. Bankruptcy is the last option, if DIL is disapproved, and since you intimate your bank about DIL procedure, there are less chances to foreclose on property. And in your case, there is deficiency amount, hence worth taking a good move on DIL.

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