Chapter 13 or Foreclosure

Anonymous · ‎03-02-2010

I lost my job in 2008 and was unemployed for 8 months. The new job I took in sales promised more in commissions than what actually happened. During my time of unemployment I unfortunately racked up credit card debt to cover my expenses. In June of 2009, I new that my time was running out on being able to cover everything. I applied for a loan modification, but I'm assuming since I had not paid late EVER on my mortgage, or my revolving debt, I basically was in limbo for months. I made the choice thinking that if I were to get my loan modified that I could recover on that ONE debt, so I stopped making my first mortgage payment - but paid everything else on time. I received a foreclosure notice in November and the sale date is this month. I had not received any decision on my original request for loan modification.

Time is now running short and I've continued to pay everything but the first mortgage - car, second mortgage, credit cards. I resubmitted my loan mod paperwork, and now it seems to be moving through the system. I've consulted a bk attorney knowing that Chapter 13 could stop the foreclosure if I don't get a decision before the sale date. My current financial situation is improving, but it's far from being able to cover the arrearage on the mortgage, as well as all of the fees that they tack on for the foreclosure. If I did receive a loan mod, I might be able to keep the ship afloat, but it will take time to pay off my debt and every month will be tight. If I file Ch 13, I can afford the mortgage payments, along with the bk payment arrangement.

My credit report only has a "Foreclosure Proceedings Started". No other lates on any other debt. If I file Chapter 13, I assume that my score will be hit again, but I could repair it over time. My question is this: does having a foreclosure started on my report as detrimental as having a Ch13? Have I already ruined my credit enough that if I file Ch 13 it won't make much difference 3 years from now?

Thanks - I'm just really struggling with which way to go...

Anonymous · ‎04-09-2010

I'm not positive but I believe the foreclosure will negatively impact your score more than the ch 13. One big advantage to a 13: in certain circumstances you can "strip off" the second mortgage and just pay the 1st mortgage. I'd need to know where you live, but in many cases, assuming there is no equity in the house after you deduct the 1st mortgage, the court will treat the 2nd as another unsecured creditor for purposes of the chapter 13 plan.

Anonymous · ‎05-08-2011

I filed a chapter 13 and included my 1st and 2nd mortgage and gave up the house. The home was built on wet land by the builder and sold to me knowing it would not perc for a sewage system. We were in the home only 2 weeks after closing when my family and I got sick and found out the water was contaminated and the sewage backed into the home only a month after closing.

The home had a 2/10 home warranty that was included by the builder that forced us into binding arbitration for almost 5 yrs. After almost 5 years of legal fees and case preparation costs, the warranty company installed a drip system right at our back door and sewage water stood on top of the ground, and they refused to repair the well contamination. I had to get out of the house and move on, and the debt that accumulated was over 30K. I filed bankruptcy and listed the 1st and 2nd loan on the mortgage, but the mortgage company keeps reporting late payments on the loans and the 2nd mortgage is listed as my still owing it.

Can the mortgage company keep harassing me and reporting on my credit report that I owe them this 2nd mortgage even though they have sold the property and have the 1st loan listed as foreclosed and sold? How do I get this removed? Is this legal for them to keep reporting to the credit bureaus?

Thank you,