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We filed Ch 7 bankruptcy and it was discharged in 2010 in Colorado. Our house was included in the discharge. We did not reaffirm the loans but have continued to pay the mortgages as we wanted to stay in our home. Now we are facing possibly having to move out of town for a job. Due to the housing market most likely the house would sell for less than what we owe on the 2 mortgages. Do we pay the lender whatever we get out of the sale or do we just walk away, let it foreclose since the banks own it anyway.
Optional Information: State/Country relating to question: Colorado Already Tried: We tried contacting the lawyer that helped us with the bankruptcy discharge, but have not heard back from them.
Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarification.
If you filed a bankruptcy, and listed the mortgages on your petition, and they were discharged, your liability towards them is over, and you can walk away and not have to worry about any lawsuits against you as the mortgages were discharged.
You can contact the bank and advise them of the situation, they may agree to let you do a short sale, but in reality, their is no reason for you to help them out, if the house was included in your bankruptcy, you will have no obligation to pay them.
How would this affect buying a house in the new town?
if we just walked away
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Continuing to make the mortgage payments after the bankruptcy discharge is received does not reinstate your personal liability on the home mortgage.
Walking away would not hurt you, as the bankruptcy discharged your liability,
What you could do is contact the lender and deed over the home to them, so they would not have to go through a foreclosure proceeding, so the process can be final in a few weeks.
If we walk away and try to get another mortgage on a home in a different county/town will the mortgage company put "foreclosure" on our credit report even though it already says "discharged debt" under the 2 mortgages on our credit report. Trying to see how this would affect us in the long run.
If the lender actually had to go through a foreclosure that could be listed on your credit report, even if you are not legally liable for the debt, so it may hurt your credit, that is whay it would be best to contact the lender an advise them you will sign over the deed, so their is no reason for them to foreclose. This is called a deed in lieu of foreclosure.
Would we need to involve a lawyer to get the deed in lieu of foreclosure process done as our first mortgage lender is very difficult to deal with?
You may need one, however, the lender should cooperate as it it to their benefit as they save siginficant time and money by not having to foreclose on the property to sell it.
Also, in your bankruptcy petition, if you listed the property to be surrendered, then the lender may not need to foreclose, and you would not have to worry about it, as you surrendered the rights to the property to them.
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