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dbraun22 · Joined: 24 Sep 2007 Posts: 4 3.05 Dollars($)

We moved to another state due to my husband's job. Home has been on the market nearly 1 year and price reduced to $30K under payoff and still no offers. It is a depressed area and home values are dropping every day. We can no longer make the house payments and current rent. All payments are current but after October all financial resources will be depleted. We are working with our mortgage company Loss & Mitigation Dept but no response as yet. To be educated we also contacted an atty and found we will not qualify for Chapter 7 BK. Chapter 13 is an option but one we don't want to use. We've been told due to 2nd mtg a DIL is most likely not an option so we are interested in a short sale, Chapter 13 or just letting the home go into foreclosure. My husband has a credit score of 780 and mine is 789 so we hate to see those drop but do not see what other choices we have. Do you have any suggestions? The 2nd mtg is held by a credit union and they told us that they have cross-colateralization so if we default on 2nd mtg loan they will repossess our car because the loan is also held by them. We can live and pay all debts - just not 2 house payments/living expenses. Help!

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Dbraun,

Welcome to the forum.

If you are not able to afford the payments and also do not want to file for Chapter 13 bankruptcy, then you can go for a short sale. But a short sale is possible only when the value of the house will fall less than the outstanding balance on your mortgage. Through this process, the lender will sell the house at a value less than the total amount due.

Though the short sale will also have a negative impact on your score, but it will be far less damaging than a bankruptcy or a foreclosure effects.

Samantha · Posted: Tue Sep 25, 2007 5:45 am Post subject: RE: short sale or chapter 13?

Hi Dbraun.

It is better if you file Chapter 13 because this will at least give you the chance to keep your home while you start repaying a part of your debt through a Chapter 13 repayment plan. No doubt, a bankruptcy has negative affect but since you are paying a part of your debt, it will be a good option. Whereas in short sale, you are not paying it on your own, rather the sale proceeds are used to repay the loan.

You've mentioned earlier that the market isn't going your way. So, I don't think you can gather much funds through the sale. Therefore, if you have the steady income source, you may as well try out with Chapter 13.

Hope this helps...

God bless you.

Samantha

Guest

2 different opinions.......anyone else? We would rather look at a short sale than BK.

Guest

I received 2 opposite opinions regarding Chapter 13 or Short Sale. We would prefer a Short Sale vs. Chapter 13 from everything I've read. 8/06 house appraised for $236K with PO $229 for 1st & 2nd together. Currently listed @ 219,900 with no offers to date.

Are we correct in our understanding that a Chapter 13 is a 5 yr repayment in which a trustree monitors your every dollar? And takes all extra monies (overtime, raises, etc)? This sounds awful. That along with the 5 yr repayment, are we understanding correctly that we can't start rebuilding our credit until after the 5 yrs is up? Obviously, we may have to seriously consider this but a short sale is certainly more attractive if we can get the mortgage company to approve it. 1st is $181K & 2nd is $46K. Our realtor feels that we may have to lower the price to $210K to get a buyer. Please send your opinions ASAP.

evolovik26 · Posted: Tue Sep 25, 2007 6:26 pm Post subject:

Is renting the home an option for you to make the payments?
If not then your credit is going to get hit no matter what as soon as you fall behind. In order to do a short sale you would have to provide a good reason as to why you cant pay the difference. And you need a buyer. Whould reducing your interest rate on the home help? And is it even possible? What will your repayment plan will be should you file chapter 13? Are you looking to keep this home? Do you have alot of other bills besides the rent and the home?
Answer all these questions for yourself and do some research into your options and you should have a clear view of what makes sence to you. From what you are telling you have overextended yourself at a bad time and now suffering the consequences.
One thing in whatever decision you will make make sure to move before your credit starts to suffer. Most people can bounce back from bancruptsy and or foreclosure but if its all piled up together with lates on mortgage and other bills you are looking at a long time with no credit. Make sure that you are working with professionals to limit damage with your credit.

evolovik26 · Posted: Tue Sep 25, 2007 6:28 pm Post subject:

Also in a chapter 13 BK you only repay your debts partially as far as i know so it might not be as bad as you think. And the judges will leave you income they deem reasonable. Talk to an attorney

Samantha

Hi Dynees,

Welcome back.

I think there is some kind of misunderstanding. You can rebuild your credit while you pay for the Chapter 13 Repayment Plan. And, this is a court approved plan, so the trustee will perhaps not be able to extract a lot of money from you. The trustee is there to collect and distribute payments actually.

Hope this helps..

God bless.

Samantha

Guest

Thank you for the info. We have tried renting - nothing. We do not want to keep the IN house. We moved for my husband's job and are now trying to unload this house. We do not have a buyer but our realtor thinks that if we lower the price "again" we may draw someone in since this is a buyers market. Other than the house we do not have a huge debt load. It's just the house and expenses in IN plus rent and lving expenses in our current location that are killing us. We never expected this house to sit or that we would ever be in this situation.

jenkin7 · Posted: Wed Sep 26, 2007 11:35 pm Post subject: RE:

Hello Dynees,

But in a short sale, if the lender asks for a deficiency judgment, will you be able to pay for it?

Guest

Hi Dynees,

Before doing a short sale, you must ensure if you will be able to pay for the deficiency judgment or not. And if you are not able to pay it off, the lender can charge off the debt. But, in that case, it will shown on your credit report as a negative item and will seriously damage your credit score.

Guest

Please explain in detail what a deficiency judgment is. If the 1st lender will accept a short sale (assuming we get this deficiency judgement figured out), then does the 2nd lend also have to agree? I would assume both would have to agree. With all the other issues it's very difficult to know what we should do. DIL seems to be out because of the 2nd mortgage, short sale seems to have some negatives, foreclosure sounds like a mess and bankruptcy chapter 13 (we don't qualify for chapter 7) looks to be a nightmare. Any options that we are not aware of? Tried to rent - nothing. What options can the mortgage company offer? We've filled out and faxed (a week ago) paperwork they requested but have not heard from them yet. We're really at a loss as to what the best avenue would be.

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Dynees,

If the sale of the property does not result in full recovery of the outstanding balance of the loan, then the lender can seek a deficiency judgment in the court. And the court will send you an order to pay for the difference between the outstanding loan balance and the home sale price.

Samantha

Hi Dynees,

I can make out what you're going through. Indeed it's tough time but please do not lose hope.

See Dynees, this is how it goes. If you are paying off your home loan either by selling off your home through short sale, there is always a difference in the unpaid loan balance and the home price. This difference is the deficiency amount.

Even in foreclosure, it may happen that the lender is not able to sell your home at the price which can cover your balance. And, then he may approach the court and ask for a judgment which will allow him to collect the deficient amount from you. This is known as the deficiency judgment.

If the first lender agrees to a short sale, the second lender may or may not agree but then you will have to pay him for his part of the balance. Does the second lender know about your situation? You should at least keep him in the loop. If you can prove to the second lender that you're in financial hardship, you may not have to pay off the second loan and the latter might forgive your debt.

However, there will be the tax payments to the IRS on your forgiven debt. But I don't understand one thing – why are you scared of bankruptcy? I know it's not good but a chapter 13 is not that bad either because you'll be repaying a part of the loan or that will help rebuild your credit condition. And, if you feel like, you may even consult a credit counselor to check if bankruptcy chapter 13 is a suitable option for you. But do consult someone credible enough or else you'll again pay him for no service at all and end up losing more money.

Hope this helps...

God bless you.

Samantha

livinginnky · Posted: Sat Sep 29, 2007 11:45 am Post subject:

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