“Dear Steve,
I purchased my house during the bubble. The morgage is severely upside down. I was able to secure a loan modification and it has made monthly payments manageable. I have some major debt problems and am looking at filing for bankruptcy.
I know that I would be allowed to keep my home if I reaffirm the loan. Because of the dimished value of the house (as well as a second mortgage), I do not wish to do this.
SO, the question is: If I file for bankruptcy and am up to date on the mortgage payments, will the bank let me stay in the house if I continue to pay? (I assume this would absolve me of any continued long-term financial responsibility for the house.)
Thanks for all you do, Steve:)
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Sage”
Dear Sage,
Interesting question.
Let me see if I have this straight, what you want to do is include the mortgage in a Chapter 7 bankruptcy and discharge it but continue to live in the house by making the mortgage payments. Is that right?
I have talked to a local bankruptcy attorney about doing a Chapter 13 bankruptcy to stay in your house but put your other debts on a reduced payment plan?
Please post your responses and follow-up messages to me on this in the comments section below.
I wish to discharge all my debts and believe that I would qualify to do a Chapter 7. I do not want to reaffirm the upside down mortgage debt.
Will the bank let me stay in the house if I keep paying? It didn’t seem likely to me, but I read online somewhere that you could. Doesn’t seem likely, huh?
Sage
While I have heard of cases like this happening, either because the bank does not want the empty house back now or whatever, unless you get a written agreement with the bank you can be kicked out at anytime, and almost worse off, you will still be obligated to pay property taxes for a home you no longer own.