Posted on: 20th Mar, 2008 03:11 am
if you're behind on your mortgage, and there aren't any alternatives available to help you get out of the problem, you'll have to decide between foreclosure and bankruptcy chapter 13.
when to file chapter 13 and why
when you have to decide upon foreclosure vs bankruptcy, the first thing to ask yourself is whether you'd like to keep the house. if you're keen on keeping the house, filing for chapter13 makes sense. this helps you to pay off all or part of the mortgage, especially the amount by which you're behind on the loan. the payoff period in chapter 13 is quite short, that is within 3-5 years. however, you'll have to go through credit counseling session within 6 months prior to the date of filing bankruptcy. then you'll have to pass through the means test which confirms whether you're eligible for chapter 13.
more about chapter 13
when you file for chapter 13, you must create a repayment plan and submit it with your petition. the court appointed trustee will then review the repayment plan with your attorney and your creditors. the trustee will then negotiate with your attorney and lender if any alterations to the repayment plan are needed.
once your bankruptcy petition has been filed, your lender is barred from suing you in foreclosure during the bankruptcy proceeding and for at least 30 days after your case has been closed.
the question of foreclosing at the end of the 3-5 year period doesn't arise if you have cleared the debt and are able to continue paying down the outstanding balance. however, you will have to wait 1-2 years after your bankruptcy case has been finalized to try for a refinance.
once your bankruptcy petition has been filed, your lender is barred from suing you in foreclosure during the bankruptcy proceeding and for at least 30 days after your case has been closed.
the question of foreclosing at the end of the 3-5 year period doesn't arise if you have cleared the debt and are able to continue paying down the outstanding balance. however, you will have to wait 1-2 years after your bankruptcy case has been finalized to try for a refinance.
foreclosure vs bankruptcy chapter 13
chapter 13 shows you've tried to clear debts instead of avoiding them, and this has a more positive impact on your credit report than foreclosure does. however, if you fail to reorganize your debts and catch up with the payments, the bank is likely to foreclose after your bankruptcy, and then you'll have both bankruptcy and foreclosure on your credit. so, you shouldn't miss any payments under the chapter 13 plan or the court will dismiss your case and then you'll have no option but to go through a foreclosure.
another positive aspect of chapter 13 is that it helps you keep your home. but when you end up in foreclosure, you may lose the house and if the house doesn't sell for the total amount of the loan, the lender will file a deficiency judgment. this will be reported on your credit report and is likely to affect your credit.
there are tax issues involved with deficiencies. if the lender forgives the deficiency you will have to report the forgiven amount on your federal income taxes. however, even though you report that the deficiency was forgiven, does not mean you will have to pay taxes on it. as of 2009, the irs does not require you to pay income tax on money forgiven due to a foreclosure.
another positive aspect of chapter 13 is that it helps you keep your home. but when you end up in foreclosure, you may lose the house and if the house doesn't sell for the total amount of the loan, the lender will file a deficiency judgment. this will be reported on your credit report and is likely to affect your credit.
there are tax issues involved with deficiencies. if the lender forgives the deficiency you will have to report the forgiven amount on your federal income taxes. however, even though you report that the deficiency was forgiven, does not mean you will have to pay taxes on it. as of 2009, the irs does not require you to pay income tax on money forgiven due to a foreclosure.
credit effects - foreclosure vs bankruptcy
once you file bankruptcy, the creditor/lender can no longer sue you to collect on a debt until the it has been discharged. once it has been discharged, you can rebuild your credit in 2 years. by the time you get served with the summons for foreclosure, your credit score has already taken a hit. by the time your lender takes possession of your home after the sheriff's sale, you will be facing at least another 5 years of rebuilding your credit.
bankruptcy stays on your report for 7 years, but it doesn't affect your credit rating after the initial hit. the best thing is, since you get an automatic stay from collection activities after you file, your credit score will freeze until the bankruptcy process is complete. so, it's better to have a 650 score with bankruptcy instead of a 480 score and a foreclosure.
bankruptcy is an option that will help you to avoid foreclosure. but when it comes to deciding on foreclosure vs bankruptcy, you have to decide which option will work better in your particular situation. so, the best thing to do is to contact your lender and start to negotiate a loan modification as soon as you realize you cannot afford your current mortgage payments any longer.
bankruptcy stays on your report for 7 years, but it doesn't affect your credit rating after the initial hit. the best thing is, since you get an automatic stay from collection activities after you file, your credit score will freeze until the bankruptcy process is complete. so, it's better to have a 650 score with bankruptcy instead of a 480 score and a foreclosure.
bankruptcy is an option that will help you to avoid foreclosure. but when it comes to deciding on foreclosure vs bankruptcy, you have to decide which option will work better in your particular situation. so, the best thing to do is to contact your lender and start to negotiate a loan modification as soon as you realize you cannot afford your current mortgage payments any longer.
related forum discussions
Sussane,
Thank you so much for your help! I am not able to contact my ex due to invalid phone numbers and I have no idea where he lives now. If I filed bankruptcy would I be off all obligations for the home and forclosure? I spoke to the bank today and the forclosure should be initiated on Monday but could take months. Thanks for your help again!
Thank you so much for your help! I am not able to contact my ex due to invalid phone numbers and I have no idea where he lives now. If I filed bankruptcy would I be off all obligations for the home and forclosure? I spoke to the bank today and the forclosure should be initiated on Monday but could take months. Thanks for your help again!
Hi Ms F,
If you file bankruptcy, it will stop the foreclosure proceeding immediately. If you file Chapter 7, then you can surrender the property to the lender who will foreclose it and recover the dues. If you reaffirm the loan, then you will become responsible for the mortgage dues again.
If you file Chapter 13, then the lender would give you a payment plan to pay off the dues within 3-5 years. This will help you in saving the property.
If you file bankruptcy, it will stop the foreclosure proceeding immediately. If you file Chapter 7, then you can surrender the property to the lender who will foreclose it and recover the dues. If you reaffirm the loan, then you will become responsible for the mortgage dues again.
If you file Chapter 13, then the lender would give you a payment plan to pay off the dues within 3-5 years. This will help you in saving the property.
original warranty deed is in my name only. mortgage paperwork filed with r/d's office has both ex and my names on it.
somewhere in my fooooolish attempt to show my concern and to take her sorry tail and her 3 kids (one of whom was 32 at the time) out of the welfare system and give them a good home i said that i wanted to make sure the house was hers - no matter how we ended our marriage not that i thought we'd end our marriage but of course who doesnt think that in the first 5 months of a marriage - so i signed a quit claim (joint tenacy) deed - thinking that i was going to make sure she had a right to the home because her name was not on the original deed. 12 years , 5 of those years in separation, and 1 year into my current marriage (yes the sun do shine again and god is good) my wife requests a look at our borrowing potential and sees a very recent hard inquiry on my credit report that both she and i were completely unaware of happening as well as why it would have happened. we contacted the company that made the inquiry to find out that my ex wife - separated over 5 years and divorced over 1 year has just a month ago, been given approval for a repayment agreement and when i asked the mortgage company about it - they said yes - the mortgage which they say is only in my name (unknown yet how that happened because it was originally in both ours) it's in loss mitigation and repayment agreement made based on my salary and my credit report.
it was late friday when all this came to light and i will contact our lawyer on monday before i talk to the mort. company again but i can't sleep because it's working my head and i just keep running all these things through my head and wondered if maybe someone who is awake would have an answer to some of them to help me sleep a little better.
1. ex wrote both our names in grantors - only hers in grantee. she's not even on the original warranty deed. and yes i signed it but when i looked at it i thought i thought it simply meant i'm on deed and now she is too. i paid the mortgage (punctually) when i was in the home. hell, i worked 2 jobs, 18 hours a day but she decided that she'd skip a few payments because her daughter needed modeling lessons. the first overdue notice that i found in a drawer sent me over the limit and i left for good. anyway - according to the r/d's office - there is orig. deed. (my name only) original and now assigned mort. with both our names on them and quit claim (joint tenancy) that clearly states me and her (grantors) and her as grantee. which means, with the mortgage in default status i can't even make an agreement to short sale it without her approval - but my wife says that she doesnt think the quit claim is proper document because there was a lien on the home and a mortgage company that would have to agree to it - and that was never done because i simply figured i was adding ex wife not taking me out of property rights.
2. i simply do not understand this repayment agreement handled by ex only using my information on a 1 year past due payments home in my name without my approval or authorizations.
so anyway - the mortgage company says that mine is the only name on the mortgage so i faxed over a request to remove from loss mitigation as well as remove ex from being able to speak to them concerning the mortgage. i also immediately placed 90 day fraud alerts with credit bureaus to curb whoever is obviously using my personal information so freely.
i gotta admit it felt good to get all that out. and i sure hope the lawyer at the very least can help direct me out of this situation.
somewhere in my fooooolish attempt to show my concern and to take her sorry tail and her 3 kids (one of whom was 32 at the time) out of the welfare system and give them a good home i said that i wanted to make sure the house was hers - no matter how we ended our marriage not that i thought we'd end our marriage but of course who doesnt think that in the first 5 months of a marriage - so i signed a quit claim (joint tenacy) deed - thinking that i was going to make sure she had a right to the home because her name was not on the original deed. 12 years , 5 of those years in separation, and 1 year into my current marriage (yes the sun do shine again and god is good) my wife requests a look at our borrowing potential and sees a very recent hard inquiry on my credit report that both she and i were completely unaware of happening as well as why it would have happened. we contacted the company that made the inquiry to find out that my ex wife - separated over 5 years and divorced over 1 year has just a month ago, been given approval for a repayment agreement and when i asked the mortgage company about it - they said yes - the mortgage which they say is only in my name (unknown yet how that happened because it was originally in both ours) it's in loss mitigation and repayment agreement made based on my salary and my credit report.
it was late friday when all this came to light and i will contact our lawyer on monday before i talk to the mort. company again but i can't sleep because it's working my head and i just keep running all these things through my head and wondered if maybe someone who is awake would have an answer to some of them to help me sleep a little better.
1. ex wrote both our names in grantors - only hers in grantee. she's not even on the original warranty deed. and yes i signed it but when i looked at it i thought i thought it simply meant i'm on deed and now she is too. i paid the mortgage (punctually) when i was in the home. hell, i worked 2 jobs, 18 hours a day but she decided that she'd skip a few payments because her daughter needed modeling lessons. the first overdue notice that i found in a drawer sent me over the limit and i left for good. anyway - according to the r/d's office - there is orig. deed. (my name only) original and now assigned mort. with both our names on them and quit claim (joint tenancy) that clearly states me and her (grantors) and her as grantee. which means, with the mortgage in default status i can't even make an agreement to short sale it without her approval - but my wife says that she doesnt think the quit claim is proper document because there was a lien on the home and a mortgage company that would have to agree to it - and that was never done because i simply figured i was adding ex wife not taking me out of property rights.
2. i simply do not understand this repayment agreement handled by ex only using my information on a 1 year past due payments home in my name without my approval or authorizations.
so anyway - the mortgage company says that mine is the only name on the mortgage so i faxed over a request to remove from loss mitigation as well as remove ex from being able to speak to them concerning the mortgage. i also immediately placed 90 day fraud alerts with credit bureaus to curb whoever is obviously using my personal information so freely.
i gotta admit it felt good to get all that out. and i sure hope the lawyer at the very least can help direct me out of this situation.
If your name is on the property deed, then your ex-wife won't be able to transfer it in her name without your signatures. You will have to transfer the property in her name by signing a quitclaim deed.
If you are responsible for the mortgage then you should be contacted for the mortgage dues. You've taken the right decision by asking the mortgage company to deal with you directly regarding the mortgage.
If you are responsible for the mortgage then you should be contacted for the mortgage dues. You've taken the right decision by asking the mortgage company to deal with you directly regarding the mortgage.
I'm hoping you can answer some questions I have regarding my situation in Michigan. Here is my dilema:
Several years ago, my wife and I refinanced our house. Days before the closing, the lender learned that my factory had suddenly closed and insisted that my name be removed from all loan documents, making my wife the sole borrower. She had very little income, but the mortgage broker somehow made this "no doc" loan go through.
Last year, we were living apart and I found that she had been unable to keep the payments up and the house was in foreclosure. I had purchased a home with only my name on the mortgage, and she subsequently lost the original house in a sheriff sale for about $75,000 below fair value and moved in with me.
She has no job and no assets, and we drive older cars that are in my name, and I have virtually no equity as I bought our current house FHA with little down. Now, we learn that the lender of the foreclosed house is suing her for the deficiency. From what I understand, this is rare.
Being that we really have nothing to take, why would they do this? Also, if this bank received federal bailout money for bad loans, wouldn't they be double dipping? Is my current house and 10 year old car in danger?
Thank you in advance.
Several years ago, my wife and I refinanced our house. Days before the closing, the lender learned that my factory had suddenly closed and insisted that my name be removed from all loan documents, making my wife the sole borrower. She had very little income, but the mortgage broker somehow made this "no doc" loan go through.
Last year, we were living apart and I found that she had been unable to keep the payments up and the house was in foreclosure. I had purchased a home with only my name on the mortgage, and she subsequently lost the original house in a sheriff sale for about $75,000 below fair value and moved in with me.
She has no job and no assets, and we drive older cars that are in my name, and I have virtually no equity as I bought our current house FHA with little down. Now, we learn that the lender of the foreclosed house is suing her for the deficiency. From what I understand, this is rare.
Being that we really have nothing to take, why would they do this? Also, if this bank received federal bailout money for bad loans, wouldn't they be double dipping? Is my current house and 10 year old car in danger?
Thank you in advance.
Hi Rory,
Deficiency judgments after a foreclosure are permitted in Michigan. So, the lender can sue your wife for the deficient amount resulting from the sale of the property. If she is unable to pay off the dues, then the lender would garnish her savings account. If she is one of the owners of the current property, then the lenders can place liens on it.
Thanks
Deficiency judgments after a foreclosure are permitted in Michigan. So, the lender can sue your wife for the deficient amount resulting from the sale of the property. If she is unable to pay off the dues, then the lender would garnish her savings account. If she is one of the owners of the current property, then the lenders can place liens on it.
Thanks
Only my name is on the mortgage for my current home. Can they still put a lien on it because we are married? What if she files bankruptcy?
Also, she has no savings account, and my accounts are in my name only. Are my accounts safe? Is there something called a "Damaged Spouse Claim" that I can file on my behalf, and do I need to?
Also, she has no savings account, and my accounts are in my name only. Are my accounts safe? Is there something called a "Damaged Spouse Claim" that I can file on my behalf, and do I need to?
Hi Rory!
Welcome back to forums!
If your wife's name is not mentioned in the property deed, then the lender will not be able to place a lien on your property. Though she files for bankruptcy, the trustee will not be able to sell off this property to recover the dues as you own this property. As the savings account is in your name, they are safe. I do not have much idea about "damaged spouse claim". It would be a good idea to consult an attorney regarding this.
Feel free to ask if you've further queries.
Sussane
Welcome back to forums!
If your wife's name is not mentioned in the property deed, then the lender will not be able to place a lien on your property. Though she files for bankruptcy, the trustee will not be able to sell off this property to recover the dues as you own this property. As the savings account is in your name, they are safe. I do not have much idea about "damaged spouse claim". It would be a good idea to consult an attorney regarding this.
Feel free to ask if you've further queries.
Sussane
i look forward to the communitie's input on my issue.
i am looking into filing for bankruptcy. i have small business loc debt that i am personally liable for with payments i can't keep up with along with some personal cc debt. along with that i own one property. my property is pretty far underwater. i live in california. i have a first and second mortgage. i want to keep my house. i am in the trial process for a modification on my first mortgage that should go through. my house is appraised at a value that is worth less then what my first mortgage amount is, so my second is way out of position and i assume is not secured by the property.
what i would like to do is file chapter 7 to absolve me of all my loc and cc debt, which i can't afford to pay. i don't want to list my mortgages as part of my chapter 7 because i would like to stay in my home. once my modification goes through, i should be fine in paying my first mortgage so that is not the problem.
my question is, if i file for chapter 7, can i list my second mortgage as something i am looking for protection from but leave the first alone since i'm able to make the payments? will the second be able to force my hand with my first mortgage. this is my primary residence, i don't own any other property.
thank you all for your help.
i am looking into filing for bankruptcy. i have small business loc debt that i am personally liable for with payments i can't keep up with along with some personal cc debt. along with that i own one property. my property is pretty far underwater. i live in california. i have a first and second mortgage. i want to keep my house. i am in the trial process for a modification on my first mortgage that should go through. my house is appraised at a value that is worth less then what my first mortgage amount is, so my second is way out of position and i assume is not secured by the property.
what i would like to do is file chapter 7 to absolve me of all my loc and cc debt, which i can't afford to pay. i don't want to list my mortgages as part of my chapter 7 because i would like to stay in my home. once my modification goes through, i should be fine in paying my first mortgage so that is not the problem.
my question is, if i file for chapter 7, can i list my second mortgage as something i am looking for protection from but leave the first alone since i'm able to make the payments? will the second be able to force my hand with my first mortgage. this is my primary residence, i don't own any other property.
thank you all for your help.
Hi Lupas,
If you file Chapter 7, then you'll have to list all your assets. You cannot include your second mortgage alone in the bankruptcy. You'll have to list both of them. As you want to save the property, then you'll have to reaffirm the mortgage with your lender. However, you should note that as soon as you file bankruptcy, the lender will stop the loan modification process and wait for the court's judgment.
Thanks
If you file Chapter 7, then you'll have to list all your assets. You cannot include your second mortgage alone in the bankruptcy. You'll have to list both of them. As you want to save the property, then you'll have to reaffirm the mortgage with your lender. However, you should note that as soon as you file bankruptcy, the lender will stop the loan modification process and wait for the court's judgment.
Thanks
We have 2 months left on our redemption period, tried several things, hard money lenders, finding person to buy our house and sell it back to us on a Land contract, we are out of options, we want to keep our house, can we file bankruptcy now, to keep it, we want to pay our debts, but I lost my job, and could not find one, husband made money in Texas, but it was to late,
By the way I am in Michigan. Please help, I don't want to lose my home.
By the way I am in Michigan. Please help, I don't want to lose my home.
hi nancy,
as far as i know, the redemption period starts after the property is sold off at the auction. meanwhile the ownership is temporarily transferred to the new owner. redemption period just allows an extended period to the previous owner to buy back the property if he/she can arrange the required amount. in this situation, i don't think filing bankruptcy can help you in any way. however, you can definitely contact a bankruptcy lawyer and take his opinion in this regard.
thanks
as far as i know, the redemption period starts after the property is sold off at the auction. meanwhile the ownership is temporarily transferred to the new owner. redemption period just allows an extended period to the previous owner to buy back the property if he/she can arrange the required amount. in this situation, i don't think filing bankruptcy can help you in any way. however, you can definitely contact a bankruptcy lawyer and take his opinion in this regard.
thanks
I live in Florida I have a home that Im 6 months behind and have received a summons of foreclosure I have tried loan modification, short sale (the house was appraised for 90,000 talked them down to 86000 and the offer was 80000 and not accepted) tried deed in lieu was not accepted the house was appraised by them for 90,000 and my loan is worth 162,000 I dont want the house anymore have about 10,000 in other debt should i let the house foreclose or file bankruptcy and not really concerned about my credit score.
I live in Florida I have a home that Im 6 months behind and have received a summons of foreclosure I have tried loan modification, short sale (the house was appraised for 90,000 talked them down to 86000 and the offer was 80000 and not accepted) tried deed in lieu was not accepted the house was appraised by them for 90,000 and my loan is worth 162,000 I dont want the house anymore have about 10,000 in other debt should i let the house foreclose or file bankruptcy and not really concerned about my credit score.