Short Sale Foreclosure or Bankruptcy for Upside Down House

I have a question for you regarding a foreclosure vs. bankruptcy.  The home my wife and I live in is currently in her name only.  We are stuck in a terrible interest rate and have been on time for the past 4 years.  Our mortgage company wouldn’t work with us and we decided to stop making payments to see if they would in turn work with us.  To this point they have not.  We are 120 days past due and have received notice of them starting the foreclosure process.  My question is this:  Would it be better to have her file for bankruptcy and relieve the debt that she has in her name and start from scratch, or would it be better to simply foreclose on the house and start building credit again while paying off the present debt.  I have gone and been approved for a new home loan, but if we are going to be foreclosing on the current house, we will be staying there until they make us leave.
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If she does not find it problematic with OTHER assets .. like a car … expensive stereo and what not
I would say that bankruptcy would be best in that one cannot be sued for the difference between the selling price and payoff. I assume the payoff is fairly high.
Foreclosure puts the bankers in control.
Bankruptcy allows the court to itemize all assets and then liquidates as much as possible to pay off debtors as much as possible.
In this area you should ask a bk lawyer and realize you are asking a tire salesman if you need tires. Just get the facts of liquidation and assets.
 
as far as your credit goes. neither is going to help you more unless you do owe a lot and the bank lets the house go for no reserve at auction and takes what ever bid they get. This can make you liable.
 
might ask your mortgage holder about a short sale. I guess youve tried to sell it too.
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Yes, we have tried everything.  I actually tried myself to buy the house since I wasn’t on the note, but they said no because I ‘had an interest in the home.’  They also told us that they would accept the price that I offered for a short sale, but that they weren’t going to accept it AND let us remain in the home.  It’s been a pretty brutal ride.  My wife purchased the home before we were married and was in an ARM.  Of course the payment got out of control so she went to them asking for help.  They stuck her in a 9.8% interest rate with a pre-payment penalty. 
 
I really like the website you’ve set up.  It’s very helpful and I appreciate people like yourself that put info out there that is free.  Thanks for the help.
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on a short sell it would be considered like insider trading to sell to someone who lives there
the price would always be in question
short sell to someone other than you
 
i assume you are not willing to buy the house for your payoff?
you can see why the bank is balking if your not willing to make payoff…
 
the house has been financed for how long now?
what is your pre payment penalty?
 
banks that lend on cars houses boats and other big ticket items
get discounted interest rates. If you payoff early there is usually a fee for stuff that is less than 1 – 2 or 3 years depending on the ticket price and length of loan. Unless you go through a credit union. Many have a standard 250 if paid off in less than so many months or years. These fees are usually covered during closing and of course so is the adjustable arm stuff.
 
Sounds to me like. You would like to stick to the man somewhat. Foreclosure puts you in the house longer for less.
But I would not recommed this action as your wife might be liable in the future for further legal matters.
 
Short sell to another individual
Finance it your self for the payoff and negotiate some reasonable discounts. Not sure what that would be other than dropping late fees, interest and maybe something for good faith. A couple payments I dont know?
Bankrupt 7 and figure your wife needs to get some credit going now
Bankrupt 13 and hope you refi everything at a discount
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-sort sale and refi will help your wifes credit the most
-on a 7 she will be free and clear now and cannot refile for 7 years. But if she starts new credit she will will be good to borrow in one year with some complications when looking to top level interest rates. If she files bk on a home. Very few lenders will finance her on another house until the full seven years expire and the reference to 7 on your report is removed
-on a 13 she keeps the home and can get new credit as soon the 13 is discharged. Which can be a VERY long time on houses depening on the courts ruling
-forclosure looks like a 7 to most lenders with one addition. Usually judgements leins and other stuff get tacked on. Plus the account will showed maxed out or unpaid until 7 years pass ane the foreclosure reference is removed
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We started talking to the bank in early October.  We asked them if there was something they could do for us because our OT was cut back for both my wife and myself.  They literally said there was nothing they could do.  The mortgage is 4 years old this month.  We then went to another bank that approved my wife and I, and agreed to try a short sale refi.  They came out and appraised the home for $145K.  The principal balance is $198K.  This was back in October, and it’s continued to fall.  We live in a suburb of Detroit, so you can imagine.
 
We tried the short sale and had 1 offer that was ridiculous.  That’s when I decided to try and make the purchase which they declined.  They did come back and say that they would decrease the interest for a modification.  They wanted to lower it to 7.5% for 3 years and then it would reset back to 9.8%. 
 
They have been really unpleasant to deal with.  I have good credit, but I’m not on the note like I mentioned before.  My wife’s credit was in the lower 700’s and now we have no idea where it’s at, but we’ve gotten notices from her credit card lenders that have stated that they are decreasing her credit limits and such.  Until we decided to finally stop making the payment in February, we had never missed a payment or was ever even late. 
 
Due to the fact that there hasn’t been any interest by First Franklin to actually work with us, we are leaning toward the bankruptcy.  We have our first child due in October and paying $2,000+ for a mortgage has been something we were able to do, but we were treading water.  We haven’t been able to save any money at all.  Due to the fact that my credit is in good shape and I’ve been pre-approved for a loan, we are probably going to take some of your advice and talk to a bankruptcy attorney.  We could walk away from this house and buy another bank in the area.  Bank owned homes are everywhere around here and could turn out to be a much wiser investment than where we currently reside.
 
Sticking it to these people would actually be something I’d truly enjoy.  We both go to work every day, we pay our taxes and our bills yet these people want to continue sticking to us, even though we’ve kept up and been responsible for the past 3+ years.  I’m really disappointed in the system and it’s shown me why we are in the mess that we are as a country.  We haven’t been trying to get anything for free.  We have simply been trying to stay in our home.  I don’t know if you’ve heard of the ‘produce the note’ philosophy, but we are making an attempt with that.  It’s sort of our haymaker before we’re at the point of no return.  Maybe it will work, maybe not.  Regardless, I appreciate the chance to discuss it.  It’s crazy stressful!
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145 vs 198 PAYOFF
BK before they come get you

they can go after 50k if you let them foreclose
file now 7
find the cheapest lawyer you can
they may not be able to help you … depends on how late you are
man