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Paying mortgage after Bankruptcy

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AuroraLady
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Paying mortgage after Bankruptcy  Reply with quote  

We just finished Chapter 13 Bankruptcy (5 years of payments). 2 1/2 years ago our home was destroyed by fire. We used the insurance money to pay the first mortgage and part of the second mortgage. We still owe $70,000 and only have land that is worth $35,000. Is it worth it to continue paying this or should we walk away and let the mortgage company have the property? Can it make our credit any worse than it already is?
Post Sun Feb 22, 2015 7:24 am
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Wino
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Re: Paying mortgage after Bankruptcy  Reply with quote  

quote:
Originally posted by AuroraLady
We just finished Chapter 13 Bankruptcy (5 years of payments). 2 1/2 years ago our home was destroyed by fire. We used the insurance money to pay the first mortgage and part of the second mortgage. We still owe $70,000 and only have land that is worth $35,000. Is it worth it to continue paying this or should we walk away and let the mortgage company have the property? Can it make our credit any worse than it already is?

The problem is that after you walk away, the bank eventually forecloses and sells the property. At that time, they sue you for the difference in what you owed and what they got. They could sell it for $15K, and then sue you for $55K, which could lead to wage garnishment and/or property seizures. I don't know how Alaska works, but in TX, I think your house and car are safe, but everything else you own is prone to seizure.

You would be best to negotiate with the lender to do a short-sale, and for them to accept the funds received as payment. You'll probably have to pay some out of pocket, but I doubt it exceeds $10K. That's a darn sight better than $55K plus legal fees.
Post Sun Feb 22, 2015 7:41 am
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GardenCat
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In a short sale, you may have to pay income taxes on the amount that the bank forgives of the outstanding debt...
i.e., that forgiven amount may be counted as income for you...not fair but...
Post Sun Feb 22, 2015 6:24 pm
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