If I am foreclosed on do I have to declare Bankruptcy?

[Jill Harris]

I posted my story before but we were approved for short sale however after 7 months we realized it would not happen as appraisal was too high and we would never get an offer that high. Bank would not budge.
So then they told us to try deed in lieu. I was working with an woman on that from Cartus Asset Recovery. Very nice but just found out we are not eligible due to the extensive water damage and gutting of several rooms of house...whole reason we got into the mess in the beginning.
So now what? If foreclosure is the only thing left then I am in a hell of a mess because I work in a financial tech job where you cannot have any foreclosures on your record.
Any advice?

[Evan Bedard]

I posted my story before but we were approved for short sale however after 7 months we realized it would not happen as appraisal was too high and we would never get an offer that high. Bank would not budge.
So then they told us to try deed in lieu. I was working with an woman on that from Cartus Asset Recovery. Very nice but just found out we are not eligible due to the extensive water damage and gutting of several rooms of house...whole reason we got into the mess in the beginning.
So now what? If foreclosure is the only thing left then I am in a hell of a mess because I work in a financial tech job where you cannot have any foreclosures on your record.
Any advice?

Hey Jill,

Are you still living in this property and what state are you located in? If you cannot have a foreclosure on record and cannot get an offer on a short sale, you may only be able to avoid foreclosure through a loan modification..

[Jill Harris]

No, I have not lived in the home for 6 years. We had a closing day disaster that was not covered by insurance and home is mostly gutted which is why we qualified for short sale. We had plenty of offers and they were good ones, (from my experience in having it on market for 2 years) but the appraisal came in too high and bank would not budge on what they would take. So all offers were withdrawn eventually and it moved to deed in lieu last week. Today got word of NO on that due to water damage and gutting.
Illinois is the state but I live in another state.

[Jill Harris]

I had a home that I lived in (Illinois) , moved out of state several years ago due to job and bought another home.
At first the IL home was rented but a lot of bad things happened and I knew I was getting underwater with that and credit cards. In late 2010 I began settling my credit cards and finished the last one in March 2011. I already understand tax implications of this, I simply note as background.
Home in IL was for sale and we were underwater, reduced several times and finally (Feb. 2011) sold and we were coming to the closing table with 8k. Day of closing a disaster of epic proportion, furnace must have quit in blizzard and pipes burst, water had been running down stairs for over a week. Insurance had this little thing of 'vacant for over 60 days, no water damage liability' so we were stuck paying 7k dry out bill to prevent mold.
I qualified for short sale due to these circumstances but the appraisal was too high and we had several offers (6) but all were well short of the ridiculous appraisal. So after 7 months they said let's try Deed in Lieu. Just got word that we do not qualify due to gutting of home. So I guess they will foreclose?
What can I do? Can I get a lawyer? I do not want to file bankruptcy since I have already settled my other credit cards and am trying hard to get out from under this. I work in a financial field as a contractor and get renewed every 6 months or so and if I have a foreclosure or bk on my record I will not be renewed.
I am also worried about my home that I live in, can they take that?
There is no logic in this to me and even the DIL person told me that. It makes no sense that they will get less money in foreclosure than if they accepted the short sale offers. Surely a lawyer could make them see this? Please help me figure out some recourse. Thank you.

[TomEason]

Jill Harris

Thanks for your posts. I recommend you not waste time trying to analyze the "logic" behind a loan servicer's actions.

I'm not attempting to address all your problems here. But I can offer this. Your FCing lender cannot go after the house in which you currently live.

If it were me, I'd avoid a BK at all costs. A FC is easier to explain to your employer than a BK.

[Angels]

I think I could argue that declaring BK is easier to explain and accepted then a FC, outside of seeking a job that requires not having a BK record. The reason is that if an employer asked about it a person could explain how unreasonable and disorganized the banks have been during the process of attempting to work out a solution with them. If the loan is in a recourse state then by declaring BK the debt is extinguished and there is nothing the bank can do about it. This may show the employer the individual is forward thinking, attempted to work out a solution, and planed ahead. It also tells the employer they will not get paperwork from an attorney to garnish the workers paycheck.

BK sort of has this stigma that someone is irresponsible with his or her finances and therefore irresponsible in life. I can see where this comes from as I had a supervisor years ago that could not manage a checkbook and foolishly spent money and filed for BK at least twice that I know of. That was my only exposure to someone who filed BK so that is the impression I had. But more recently, based on the activities of our banks, how they game the mortgage system to fail, how they set up the loan docs against the individuals to their favor, how many families have sacrificed their family welfare to pay the mortgage to those people in thinking they are doing the right thing, I have a completely different take on it. In recent years I personally know 5 or 6 people who have filed for BK and they are all responsible with the money they have, just got screwed by the banks.

Not trying to rant about this or anything, I just want to get a point out that its simply a business decision and people should not continue to suffer for the banks just because they are afraid to file.

[TomEason]

Angels

Thanks for your post.

You make some good points. However, in Jill Harris's situation, she may be better served (less ill served) by a foreclosure than by BK. She has already settled her other debts, and a Ch7 won't save her home. So what would be the point in her case?

Here's Jill's quote.

I do not want to file bankruptcy since I have already settled my other credit cards and am trying hard to get out from under this. I work in a financial field as a contractor and get renewed every 6 months or so and if I have a foreclosure or bk on my record I will not be renewed.

[Jill Harris]

Thank you for the replies.

Angels, I felt the same way about BK as you relate in your second paragraph but came around to seeing it like you also.

However, in my case I agree with Tom. My employers don't care about garnishment I don't think, it is just that I work with sensitive financial date. Well, to be honest I am not exactly sure the reason but in my field most if not all job postings say 'no foreclosures or BK'. In this case I might be able to explain away the FC since it really is an unusual situation but competition is stiff and I still would worry it would hurt me.
I am about to call the servicing bank and I have a list of questions to ask them as to what to do now. I will post results.

Tom, I also know that you are correct in not trying to find logic in any of this. It is just hard for me to let that go!
Thanks again!

[Jill Harris]

I just called PHH who is the mortgage servicer for Fannie Mae. I am disheartened as they seemed to have no options for me and said it will just foreclose eventually. I asked if I could talk to Fannie Mae directly but they said it would not matter as they have the same info I have given to Cartus. I asked about getting an attorney to try to get them to negotiate getting the appraisal more in line to what it should be so we could accept one of the short sale offers but she did not know.
So does anyone know if hiring an attorney would help?
Assuming we are just heading to foreclosure and I will let it play out--I have not paid the mortgage since last June but I have paid the insurance. Should I continue to pay the insurance until after foreclosure?
I will go read all the forums about foreclosure before I ask any more questions.
thanks

[Angels]

Jill,

I am sorry to hear the bank will not work something out with you. Honestly I am not surprised, but still sorry to hear it. The bank will pay the insurance because they want to protect their interest in the property. Hiring an attorney will be throwing good money after bad. They have no magical powers or tricks to save you from a foreclosure. The attorney will do exactly what you have done and call the bank or send them letters, which will yield the same results as your efforts have.

The best option that I can see is to continue to press forward for the short sale or possibly a Deed in Lieu and hope it will happen. Stay on them about it and don’t give up!

Since your employment could be on the line have you considered approaching your employer and explaining the situation in advance? In my case, when I have someone who works for me explain the trouble they are in before I find out my view on them is more positive. As you go through this process you could keep them informed and perhaps this will show them you are making your best effort.

[Jill Harris]

Thanks Angels,

I actually was thinking that same thing, about talking to my boss. He is great and I think would understand the foreclosure thing but not a bk. However it is not his rule but the company so not sure if it would work. I am certainly going to try though.

Deed in lieu we already tried and they said NO due to the water damage, subsequent gutting of house to save from mold.

My concerns right now are these: Illinois is a RECOURSE state. I have 2 houses in another state, loans with Wells Fargo, current and never missed a payment. According to Tom (and I have verified elsewhere) they cannot take my primary residence but what about the other home (still upside down but gaining ground) and garnishment of wages. The conflicting things I have read are that Fannie Mae (the house in IL that will be foreclosed on) does not ever take recourse. If that is true and I can be even 90%sure then I will let it foreclose.

Thanks for the tip on insurance, I am going to quit paying that immediately since it went sky high after the disaster that they did not even pay for!!

[TomEason]

Jill

If you're at all concerned about insuring your personal property (contents) and your personal liability, I recommend you not rely on what may be the lender's "forced placed" policy. Those policies protect the lender's interests (the structure), but don't cover the owners' possessions.

I recommend you research your policy. If you're dissatisfied with your policy's performance on a past claim you feel they should've covered, I recommend you change insurance carriers, and if appropriate sue the carrier for not having paid a claim the policy indicates is insured.

As far as attaching other assets, a creditor must first sue you, then prevail and be awarded a court judgment. The judgment creditor can then attach any assets it can locate. In your case, it's way too early to be concerned with that possibility.

[acesfull]

Hi Jill Harris

I'm not a big fan of insurance however its a necessary evil. Since you have other assets it may be prudent to continue with liability insurance coverage on the property.

I am assuming the property is vacant and all your possessions are removed.

Should teenagers or anyone get hurt on the property in anyway, you may be responsible. Just something to consider.

Jill, Are you employed by or contracted with a goverment agency? If my query is to personal I understand.

Best regards

Nj-16 Months
Acesfull/HWP

[Jill Harris]

Thanks Tom,
No personal property there for 6 years.
I am very dissatisfied with the claim not being paid after the broken pipe and subsequent water damage. When we lived in house we had homeowners, the day we moved we changed the policy to business owners and rented out property. When the tenants moved and we put house on the market we called the agent and told him. No mention of anything needing to change about our policy but after the disaster we were told that if vacant for 60 days then no water damage, theft or vandalism would be covered. I could have let it rot but I paid (still paying) for dry out to prevent mold thinking the insurance company would eventually pay but they did not.
I had not mentioned this prior as I thought it belonged under another forum. Do these facts change your advice?

I have been reading a lot and now see something in IL called 'consent foreclosure' whereby lender can not come after you. It makes sense considering I am trying to do the right thing and have tried to give house back to them. I was, afterall, approved for a short sale based on damages and not having money to repair.

[Jill Harris]

Thanks Aces and you are correct, no personal property. Since vacant over 60 days no coverage for water damage, theft or vandalism. So teenagers could break in and spray paint the walls and I would not be covered but if they broke a leg on the missing floor I would be covered. ?? That is something!!

No, I don't work for gvt. I work for very large investment bank in IT department.

[acesfull]

Hi Jill

Yes, you may need a policy in place just in case someone gets hurt on or in the property. Or you could just roll the dice and hope nothing happens.. You are a perfect candidate for a civil lawsuit, you have assets, you have a job, you own property..

Be guided accordingly,

Nj-16 Months
Acesfull/HWP

[TomEason]

Hi Jill

I hadn't realized you'd moved out 6 years ago, so forgive my irrelevant advice about insurance coverage.

The insurance policy premiums for a vacant property is much higher than for either a homeowner's or landlord policy.

You failure to notify your insurance carrier that the house had been vacated negated the carrier's liability to cover the water damage claim. FWIW, if it were me, I wouldn't spend anymore $$ repairing the damages.

Since I assume you have assets, you might seriously consider at least carrying some liability insurance, as Aces has recommended.

[Jill Harris]

Thanks Tom and Aces,

I think I will keep the coverage as you said.

Tom, you read it wrong. I did not fail to notify agent. I did notify by phone and also had email conversation with him, asking if we needed to do anything else. He said no, the business owners we had gotten when we first left the state would still cover everything.

So to me the agent gave us bad advice.

[TomEason]

Hi Jill

Thanks for correcting my misinterpretation. It's unfortunate your agent misinformed you. He should've changed the terms of the policy, and you would have received a confirmation, usually a new "Dec page" in the mail, and a notice of the new premiums. Without written evidence, I'm afraid it would be your word against his.

However, if you can find the email exchange wherein he made that statement, a claim (or lawsuit, if necessary) may well have merit!

If it were me, I'd pursue it.

[Jill Harris]

Thanks Tom,

I am seriously considering this and yes I can prove it.

Problem has been that the agent is a friend and it hurts but the domino affect for me (financially) has been profoundly horrible and I am at the point of feeling that I must look out for myself now.

thanks for all your help and I will keep you guys posted.

[Insanity]

Is job hunting an option on the table? Many folks in IT are still in fairly high demand right now.

[Jill Harris]

Hi Everyone,

Finally some movement on my case detailed above. They would never accept the short sale offers or deed in lieu so finally they are foreclosing.
Today I received a call (left message) from a process server in FL. I have not returned their call yet but I think they want to verify my physical address in order to serve.
My question is should I make it easy and verify or avoid?
The reason I ask is that my property is in IL which is recourse and it is Fannie Mae loan.
I live in another state now and I think I read that if they are unable to serve me then they will put a notice in paper and still do the foreclosure but the good part of that is that they cannot then come after you for the loan later.
I have been searching these forums for hours trying to find where I read that and I give up so if someone can point me to that post I would be ever so grateful.
Thank you!
Jill

[TomEason]

Hi Jill

Thanks for your post. If it were me, I'd make it difficult for the lender (and the process server). I wouldn't return the process server's call and I would avoid service.

The lender can eventually be forced to serve by publication, but it will take them longer and cost them more. In my state, to effect a service by publication, the legal ad must be run in a newspaper once a week for at least 4 weeks. After the 4th week, the service of process is considered complete. Then, in my state, the defendant would have 30 days to answer that complaint.

I don't know about the lender suing you for a default judgment post FC, but I believe a FL lender can do so, that is if they can find you, LOL. Fun and games!

[Jill Harris]

Hi Tom,

Thanks for reply and I tend to agree with you, especially about making it difficult for them. And especially since it is so stupid as I was approved for short sale and they had good offers on table but refused them due to high appraisal. In the end they will get less at foreclosure sale than the offers they could have taken. I have read this story a lot.
HOWEVER, you were the one who told me several discussions ago not to try to put any logic into their thinking so with that said ---I am thinking I need to not stall this and hurry and get it over with so I can start repairing my credit. I am most concerned about deficiency judgment and I know that if I avoid being served they cannot get one.
But I have been reading and IL law has consent foreclosure so I will call someone about that today. If you get consent foreclosure they also cannot get a ddeficiiency

I will keep you posted what I choose.

thanks, Jill

[TomEason]

Hi Jill

Thanks for your follow-up.

Please know that IL laws won't protect you, and are irrelevant to actions concerning your FL property. A FC and subsequent litigation will be under FL law, where the property is located.

Good luck.

[Jill Harris]

Hi Tom,

Just want to make sure I understand. The house being foreclosed on is in IL so you are saying the deficiency judgment (if they got one) would still be valid with regards to my FL property.??
They are going to call me back Monday about the consent foreclosure and I will post then.
thanks, Jill

[TomEason]

Hi Jill

My mistake - I was thinking the property is in FL and you reside in IL. I had it backwards! Please excuse my error. What I meant to say is the FC will occur pursuant to IL law. And should the lender seek to sue you to recover a deficiency, you'll be sued in an IL court.

It's likely the plaintiff has or will retain a FL law firm to assist in prosecuting the case, but the matter will be heard in the IL court.

IMHO, making yourself difficult to serve may discourage deficiency actions by the plaintiff.

[Jill Harris]

Hi Tom,
They finally got back to me about the 'consent foreclosure' and the answer was NO. They said file was closed on February 24th and heading to foreclosure. So I guess I will be avoiding service like most people.
Nothing has happened but I will post when there is action.
thanks, Jill