Let it foreclose or file bankruptcy?

[AST19]

Our house in in forcloseure right now, we bought it in march 2006. the names on the hosue are my husband and his sisters husband. they are getting divorced now, he decided to stop paying his half, we cannot afford it. we stopped paying in August 2007. we tried to refinance to take him off but he would not sign it! now forclosure is starting........so we dont know what is going to happen, we still owe like 470,000 on the loan. we tried to sell, it was on the market for about 6 months. the realtor told us it would be best to froclose becasue it will not sell for what we owe. so we are confused, should we let it go and forclose?? and should we file bankruptcy?? if we forclose are we going to get stuck paying something no matter what?? and if we file bankruptcy are they going to take our cars away?? what will happen with the house?? and how much will we pay back??any suggestions will help!!!

[Sharon B]

Ok, first of all who is living in the house? Is it a rental. I really need to know this info to help you. What is the house worth now? Your real estate agent should be reported, letting a house go into foreclosure is irresponsibility no matter what. Once you own real estate, do what ever you can to keep it. First, have you even tried to call the lender you owe the mortgage to yet? If not, do so...they will work with you. I have one client who was in your same situation and they contacted the lender who made payment arrangements with them. Their payment was $2200 per month. The bank agreed to take $1200 per month for 3 months to get them on their feet. You only need to do the BK if you need to stall the foreclosure, but calling the bank and working with them costs way less. A BK will be around $2200 to start and up to $8,000 for the entire process. If you foreclosure, and the bank sells the house for less they can 1099 you as income for the year they sell the house, they are not going to take your cars away. The cars have nothing to do with the house, on the BK you have to pay scheduled payments to the house and the cars and any debtors. Please let me know if you need any further help.

[will_work_for_trump]

It depends a lot on the location of the residence. In California, purchase money mortgages (like yours) are non-recourse so you would not be personally liable in California. Perhaps if you would post your state, someone familiar with its laws could post an answer. But if you do live in California, you are not liable if it is the original loan used to purchase the property however walking away from the loan will hurt your husbands credit. Good luck.Jim Kirby, CPA/PFS, CFP, CFS

[operababe_61]

You really need to talk to an attorney about this. In my state even if you file bankruptcy the lender can still foreclose on the house - it only buys the owners a few months.You could sell it for less than you owe on it (called a short sale) if the lender agrees. It's very difficult but it's worth a shot. Foreclosure should be the last resort.Call the lender, try to be very factual and not emotional, don't cry on the phone and beg for mercy. Just try to show them that you'll do everything you can to get them their money back. Ask for a short sale package and see if you can get them to agree to take $400,000 on a loan of $470,000 (for instance - it all depends on what the current market value is.)But go get legal advice from a professional - do it right away!

[London]

AST19, I'm sorry to be the one to tell you this, but your realtor is an idiot. If you are still working with this person I highly advise you to terminate your agreement with them immediately. You have several option:

1.) Call your lender and face the music. Tell them that you want to "restructure" your loan. A year ago this was difficult to do, but now lenders are hurting so bad they finally realized they have to start cutting deals with troubled homeowners. Trust me when I say this, your lender does not want to take over your property. They are in the business of lending money, not property management.

2.) Get a Forbearance. The lender will give this to you, all you have to do is ask. This is kind of like a freeze on your mortgage for a specified period of time. It will give you some time to catch up.

3.) Short Sale. If you still want to get rid of the house, call your lender and tell them that you want to short sale the property. This is when the bank takes a lesser amount for the property than what you owe on it. They must approve the offer though. Your underachieving worthless realtor should have told you this.

Stop acting so paralyzed by all this and start thinking of solutions, it's not the end of the world. Go on google and research if you have questions and things you're concerned about.

DO NOT LET THIS PROPERTY FORECLOSE, and DO NOT FILE FOR BK!
These are absolute score killers and more difficult to get off your report than other items.
If the property goes through a short sale or foreclosure, you will likely be liable to pay taxes on the amount that was forgiven.
Your cars can only be taken away if you fail to pay your note on them. The court isn't gonna come and seize your car.
If you don't do any of the suggestions listed above, then your house goes bye bye, your credit will get absolutely annihilated, and you will have no choice but to live with this for the next several years. All of this is preventable. Good luck.

[jjgross]

Originally Posted by Sharon B

Ok, first of all who is living in the house? Is it a rental. I really need to know this info to help you. What is the house worth now? Your real estate agent should be reported, letting a house go into foreclosure is irresponsibility no matter what. Once you own real estate, do what ever you can to keep it. First, have you even tried to call the lender you owe the mortgage to yet? If not, do so...they will work with you. I have one client who was in your same situation and they contacted the lender who made payment arrangements with them. Their payment was $2200 per month. The bank agreed to take $1200 per month for 3 months to get them on their feet. You only need to do the BK if you need to stall the foreclosure, but calling the bank and working with them costs way less. A BK will be around $2200 to start and up to $8,000 for the entire process. If you foreclosure, and the bank sells the house for less they can 1099 you as income for the year they sell the house, they are not going to take your cars away. The cars have nothing to do with the house, on the BK you have to pay scheduled payments to the house and the cars and any debtors. Please let me know if you need any further help.

You don't have to make payments on a bk 7,you don't lose your car.By the way i believe one of the people posting works for a collection agency,you need to contact an attorney for advice.Bottom line you have to do what's right for you.NONE OF US are EXPERTS.

[shayne54]

If the house does go into foreclosure, you will get a 1099 from the lender for the amount of loss. The 1099 will have to be reported on your tax returns as income for that year. However, the mortgage forgiveness act that was passed last year allows for a time from of this year and next where you will not be penalized on your taxes for the amount of the 1099. My understanding is you will have to report it, but it will not effect your over all taxes.

Shayne