Frequent Contributor
Posts: 373
Registered: ‎07-20-2012
Re: Chapter 7 already discharged - mortgage not reaffirmed - foreclosure/credit score question



Here is my story.  I had a second summer home along with my primary home.  I lost my job and defaulted on both.  I worked on a modification with Wells Fargo.  They did not want to work with me.  I then got a job.  I was able to work out a modification on the primary house.  Discover filed a judgement against me so I had to file BK7.  A few days later I filed BK7.  I did not re-affirm either mortgage.  However, because I had a modification on the primary house, they could not foreclose on it.  The secondary home was about $55k underwater (owed $95k, sold $40k).   So they sold the house in a sherrifs sale.  They sold it back to themselves.  After 1 year redemption, I received notice that my one year was over and to pay the balance due.  I was able to get some financing and offered $60k.  They rejected my offer.  I then offered them the "cash for keys", they accepted.  I received $3000 to leave without evicition.


So, primary house is up to date with no issues.  It is not re-affirmed.  I can stay as long as I keep making payments.  The primay house was sold for $35,000 on the open market.  My credit report does NOT show a foreclosure.  Why?  Because I live in a state (Michigan) that does not use the Judicial process of foreclosure.  We use the sherrif's sale.  Nothing gets recorded in the county court house.  The deed changing hands gets recoreded in Register of Deeds which is a separate department. 


CRA use third party companies that scour court records.  They could look at register of deeds too but that would be way too time consuming and costly.  So 18 months after BK7, I will be 700 across the board.  The foreclosure could show up sometime in the next 7 years but I doubt it will.  Freddie Mac knows about the foreclosure so I will have to wait the 2 years for a new mortgage, but the CRAs have not caught it yet.


California uses a non-Judicial process as well (from what I found with a google search).  I doubt that you will be caught but others on this board will have to chime in.  Just dont let them evict you.  That is a court document that will get caught and you will be hit.  Ask for the "cash for keys" if appropriate.


Please remember that there are two components to a mortgage.  One is the actual liabilty to pay the money back.  The other is the title or possession of the house.  In BK7 the judge wipes out your responsibility to pay the note back.  It has nothing to do with foreclosure.  Foreclosure is the bank's method of recovering the security of the loan by taking back the house and selling it.  I will assume that you did NOT reaffirm your mortgage in Chapter 7 BK?


In a short sale, the bank should not update the tradeline because it should be IIB.  The short sale is only the transfer of title to a new borrower.  Get a few offers and then match them to see if they will bite.  This assumes you are back on solid financial footing again.

F'08 8/15: EQ 710, EX 710, TU 699; Clean since BK7 D/C 6/2011; Utl 6%, AAoA 5 yr, Inc=$100K, TTL CL=$144K