Wait and see or file for bankruptcy?

[ORNV3]

Hello everyone...

I just was wondering what everyone thinks about this.

Say you have no assets and your only debt is your house. The house is now worth only half of what you owe on it. You don't live in the house because you had to move for job/school. You rent the house but still loose $1000/month because you can't rent it for what the mortgage is.

The house will probably go into foreclosure eventually and you don't really care because it has sucked you dry for the last 3 years. You know you will qualify for chapter 7 bankruptcy right now. Your financial future is bright but it will take about 5 years to get there.

Lets say you live in a recourse state and you know that the second mortgage will get nothing after the first forecloses. The second is for almost $100000. The second might sue you/might sell the debt to a collection agency or just wait for your financial situation to improve and then come after you.

Would you just go ahead and file for bankruptcy to get a nice fresh start? Or would you wait and see what happens with the deficiency?

Thanks!
K

[melanieg]

Hi Ornv3,

Yes, I was debating over whether to just wait for a deficiency judgement, or file now...That said, I've decided to file sooner rather than later. Most likely June/July timeframe. I just want to start fresh now rather than look over my shoulder waiting for the 2nd mortgage to come after me. However, I am going to try to settle with the 2nd mortgage for about 8%. I doubt that will work though. So in the meantime, I am preparing now to file for BK13.

If I didn't have my kids to think about, I might have just waited the 2nd out.

But for you, say in 3.5 years from now, they decide to do the judgement. You could have already had that 3.5 years to rebuild your credit, save, etc....then when you hit the bigtime in 5 years, you will be 1/2 way to free and clear - instead of just starting to rebuild....Also, you would already have 3-4 years behind you, and you would be able to purchase a house again (if you are courageous enough!!)....Most likely at the same prices they are going for now.

Good luck!!

[ORNV3]

Thanks for you opinion. I thinking along the same lines...

I don't know if I can live day to day thinking about what might or might not happen. I feel like if I wait and see what will happen then I will be living in fear of becoming successful in the future.

As for buying a home in the future..... that's not something I'm interested in AT ALL right now. I know that one day I'll probably start a family and be more stable. Then it would be nice to have this whole thing behind me so that I can move forward.

Some might say to wait it out, but for me that means thinking about it EVERYDAY just waiting for the ball to drop. This is consuming me completely! That's no way to live! Right?

[melanieg]

Right! It is so much easier when you come to the point of realization.....I'm a strong believer that it will all turn out OK in the end....eventually. BK, for me, is the way to freedom, and now I can't wait to just do it, and not have that fear of the sheriff knocking on you door.

[ORNV3]

Freedom sounds good to me right now! My life has revolved on making a an insane house payment for the past 3 years! I decided live away from the one I loved for a year and was miserable EVERY SINGLE DAY because I knew that if I moved that I would not make as much money and would not be able to continue paying the mortgage.

Believe me... I tried to wait for the market to go back up so that I could sell. HAHA
I've waited and watched it drop for 2 years.

I don't even live in the house so it will be easy to let it go.

[ultimate4799]

Guys, agreed with you 100%... after having a big paycut(25%), can't afford my house with $760k loan now... Besides, foreclosure in my area for a bigger/newer much better house is in $300k-$400k range and this is even tougher to swallow... I talked to an attorney and he promised he can qualify me to chapter7 BK and will be filing when I got NOS.... I feel this will be the best route for my financial freedom since instead of working very hard just to catch up with mortgage payments, will have time with my family and to watch after my kid who is growing fast and needs much of my attention...

Just wanted to share my side and I wish you luck on whatever decision you will take! I advise to follow your instinct...

[tarnis]

I feel for ya's, I'm in the same predicament pretty much. Bought the house in 2004, lost my job a few years later. Seemed like all would go well when I moved, a good friend wanted to rent to own...Done deal. Year later he calls to start making arangements, hour later he's buying the next door neighbors unit(BURN!) with the slightly larger living room and because it would be so 'convienient' to just move next door not to mention stiff me out of last months rent.

Sat vacent for 4 months, got a tenant with horrible credit to finally move in and a week later was served the forclosure notice and now won't pay rent. I live four hours away from this damn house and never intended to be a land lord. It's just a big headache and with the two mortgages I was talked into the arm's are up. Getting calls constantly, the house is down 80-90K from what I bought it for not going into the structural issues on the unit. Friggen bank took the deposit/first months rent as they served notice so I can't even return that.

Bah. Anyways I only qualify for chapter 11, whatever once you kick in the credit card debt that was non-existant before getting into the dump. I just want this all to be done and over with. South florida can rot in hell.

[avwill]

It is so good to know that other people are in this same situation. I relocated from Florida to NC 2.5 years ago and had renters for the first 6 months until they trashed the place and left. By then, there was no hope for selling a condo bought in 2005 for the same amount. It has now been on the market for 2 years and there has been no short sale offer. The deed-in-lieu did not go through because I had stopped making my hoa payments in January. Btw, I stopped paying my 80/20 mortgages in July and they still have not foreclosed! I have little debt besides the home, but was worried about the bank coming after me so I sought a BK atty in December of 08. He said I had nothing to worry about because they probably wouldn't come after me. Well, 2 months ago, I started getting calls and letters from a collection agency for my second mortage which was sold off. I sent them a certified letter stating that they needed to verify that I owed them and stop calling me. This has worked and am hoping they cannot find my docs, therefore, I won't have to file for BK. I am getting letters from my HOA that they are going to put a lien on my house. Who cares though?!?!?! I don't wan't it anymore! You can still wait to file BK and get your debts clean once you receive notice of a lawsuit. From attys I have spoken with, if you are in a different state from your house, it is best to wait it out unless you have a ton of other debt. FC stays on your credit score for 7 years, BK 10. Remember BK attys want to make money too, so they are going to usually tell you that is the best option.

[mabryr1]

Does anyone know if the mortgage company can file a deficiency judgement against you after foreclosure if you have PMI insurance on your loan?
Thanks

[avwill]

Deficiency judgments depends on your state and their statues. One good book I read was "Stop foreclosure or walk away from your home with money in your pocket". It will tell you what states have deficiency judgments. It shouldn't matter whether or not you have pmi.