Foreclosure Proceedings After Bankruptcy

[hereweare]

My question involves a mortgage in the state of: Michigan.


Filled for BK with first and second added into it, both carried by same lender. Did not reaffirm but did stay and pay. We recieved letter of default and we were given 14 days to respond to the letter if we wanted a meeting or 30 days to pay the balance. We did talk to our BK lawyer briefly but since we are not paying them they gave us basic info but I am really confused and could use some clarification if possible.

1. The lawyer said since we did not reaffirm we are not responsible for any of the 1st or second mortgage and we can walk away scott free and there would not be any 1099 because we do not own the property. Is that correct?

2. Lawyer said we can't be sued for normal damage to the home (ie bad carpet, leaks, etc) as long as we do not do purposefully damage?

3. Lawyer said that we have 9-12 months before we have to move. We are filing with a non-profit that the state sent us to request a meeting with lender and that gives us 90 days, and then a month or two for the sheriff sale, and then 6 months after the sale during the redemption period?

Thank you for your help, I am very nervous that they will sue us or we will not have enough time to save money for a new place and get out.

[flyingron]

1. What the lawyer said about being able to walk is correct without regard to a 1099 is true. His reason is wrong. The reason that you won't get a 1099-C because the loan obligation was discharged NOT forgiven.

2. Well, anybody can be sued, but the lawyer is correct, you're not responsible for wear and tear to the house.

3. That's probably guesswork on his part. The absolute minimum would be 120 days (since you're already in default). They can force you out during the redemption period, but probably won't as it's hard to resell properties that are still subject to redepmtion (another six months) so that gives you probably 10 months if the bank is speedy on everything.

Are you expecting this non-profit will lend you sufficient funds to redeem the property or are you just heading elsewhere?

[hereweare]

Thank you for the reply!

Just so I am clear on the 1099, none of the balance on the home after the bank sells the home will be added as income to my tax return?

The nonprofit is going to send a letter to the lender that we want a meeting (I guess this starts a 90 period to discuss our options) and after 90 days if we can't come to an agreement to the lender they foreclose? We are planning to stay as long as we can to save up for a new place and then walk away if we can not come to an agreement with the lender. Thanks!

[flyingron]

Just so I am clear on the 1099, none of the balance on the home after the bank sells the home will be added as income to my tax return?

Correct (unless for some reason there's some PROFIT from the sale of the house, which would probably be unlikely).

I was wrong, they can't evict you during the redemption procedure unless you leave voluntarily.

I'm not going to give you strategies on how to game the 90-day negotiation stay if you have no intent to do so in good faith.

[hereweare]

If they give us an option to stay in the house then we will, but the message on my machine the other day was that there was nothing they can do for us and they were proceding with the foreclosure.

[flyingron]

Well you have ten months it would seem. Frankly, while you're in the early stages, I'd clean up the place, keep the yard mowed, weed a bit, if you've got a lot of junk pack it up and put it in the garage or other storage. Don't spend any money, but keep the place tidy as if you were trying to sell it yourself. The more cooperative you appear with the bank and their real estate company in marketing the property the more likely they are to allow you to stay. Further, if they do sell and they think you will leave in an orderly fashion, they may give you some small cash incentive to get out quickly.

[hereweare]

Do they have the right to come into the house at any point before we move out (if so what point) or do I have to let them show it to potential buyers once it is foreclosed? Honestly, the area we live in has gone down hill and I rather not have a bunch of people walking through seeing what belongings I have. I keep the yard up nice but if people are going to be in my home I want to move things into storage before so I do not need to worry about being robbed when I am not home. This is all very confusing, thank you for your help.

[flyingron]

At that point you'll be little more than tenants, yes you have to let them show the place. If you get an attitude, they'll just evict you so they can trash out the house and get it to a showable condition.

[hereweare]

Okay, I must have misunderstood. I thought the lawyer told me they can ask but I can say no until the redemption period is over because I still have some rights if I want to try to get the house back. Thanks for the info.

[flyingron]

I was talking about after the redemption period.