Need advice from AgingCare community.
Hello, all. Please don’t be insulted that I am asking for “professional help”. I trust the good advice that so many of you have given me, but there might be some legal issues with this one.
A few weeks ago, I brought a flu bug home from the daycare where I work. Seems like no matter how we plead and beg, parents still send their kids in sick. Well, I’m still coughing, but Hubby got it and got it good. It was so bad, I had to 911 him to the ER yesterday. For all intents, he was gone. The ER doctor did chest compressions for 20 minutes before his heart started again. He has so many infections, he has 7 bags of antibiotics hanging. However, things seem to be looking up at this point, TG.
So, anyway, all this got me to thinking. Last year, we filed for bankruptcy. At that time, the attorney told us we could continue to pay our mortgage or simply walk away from the house. If hubby, God forbid, should have passed, I would have been left with about $1000 less a month by the time Social Security got done with me. I doubt seriously if I could afford to keep this white elephant of a house. I could walk away, yes. But I’d have to "rehome" my dog. About 1% of rentals in my area accept pets. She is not officially a comfort animal, but she is one to me.
How do I even consider selling this house considering the bankruptcy? Who would give us a loan? Can I keep any equity we’ve accrued over ten years of payments? I’d like to buy instead of rent. Is that possible?
Thanks for any help and advice you can offer!
4 Answers
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I'm more familiar with corporate Ch. 11 workouts than individual bankruptcies, so I don't feel comfortable attempting to offer specific advice, but as Barb suggested, the attorney who filed for you would be the one to contact.
Assuming you're still able to make the mortgage payments and it's in good standing and not in default, you might consider contacting the mortgagee and raise the issue of a workout, or in more delicate terms, a restructuring of the loan.
These were common for corporate bankruptcies and corporate mortgagors during downturns, but not as common for individual mortgagors. That may have changed during and since the 2008 recession though.
A workout restructures the payments so that they're more affordable. It can also help to preserve your credit rating, but that also may depend on what other debts aren't being paid.
I honestly don't know the impact of a bankruptcy filing on getting another loan if you sell your house, but it's worth exploring. I wouldn't want you to have to resort to some of the sleezebag "lenders".
Equity isn't vanquished if you continue to make payments, but if the house were foreclosed, the amount which the mortgagee (lender) would seek would be based on the current outstanding mortgage amount, plus various costs. E.g., if the mortgage was for $150K and the outstanding balance was for $25K, you would in a sense get credit for the equity, but that's only in calculation of the outstanding amount due. Does that make sense?
(I confess my mind is a bit confused after just listening to the 6 pm news and learning that there is an Iraqi Embassy not too far from me that will be holding a memorial for assassinated Gen. Suleimani. I can't help wondering what might happen given the volatility of this issue, and my mind isn't very clear right now. I might think more clearly later or tomorrow.)
I want to share something to consider for the future. It's a bit unconventional for people in our age group but if you decide it's something you might want to try, you could start taking some small steps to move toward implementing it at some future date.
In the short term, you might be better off using the house to generate income than to sell it. Consider whether renting the whole house would provide enough income to pay the mortgage, taxes, upkeep and still allow you enough rent an apartment. A faster and somewhat easier solution may be to rent a couple of bedrooms and the family bath through an organization like Airbnb. The "become a host" section on their website details the protections Airbnb provides hosts and a calculator for how much income your could expect in your location.
I would strongly consider Airbnb for a whole or partial house rental because Airbnb's reimbursement for damages and lost rent due to damages. I have a friend who could not afford her mortgage after a divorce but was only 3 years from paying off the house. She packed a lot of her personal items and placed them in storage to "declutter" the house just like you would to stage it for selling. Initially she just rented rooms, then she put the whole house up for rental too. At the start, she stayed with friends or family when the whole house rented for a few days. The house had a garage with a half bath and she eventually made enough extra rent money to convert the garage into a temporary studio apartment. It's not fancy, just comfortable for her; didn't remove the garage door, but framed a temporary wall over most of it (around the windows) from the inside with insulation to retain heat. Added a 3'x3' shower stall and a small kitchenette along the back wall, enlarged the existing window to meet escape requirements, replaced the exterior door with a full glass door to bring in more light and the interior door with something stronger and double keyed. Put a vinyl floating floor (looks like wood) over insulation on the garage's concrete. A ductless heat pump provides HVAC. The room can easily be returned to a garage again. Last summer, a whole house long term rental (5 months) allowed her to pay off the mortgage. She continues to rent the house (partial or whole) part time to rebuild her savings. She's comfortable in her garage apartment when it's just her, but loves having the whole house when her children return to visit with their families.
Rental of a couple of bedrooms would allow you to generate some income quickly while you consider other options and maybe allow the time span from your bankruptcy to qualifying for an FHA loan to pass. You may even be able to accumulate enough for a down payment on your next home and be able to let the house generate an income for years to come. Although it may be too difficult to rent rooms while caring for your husband, you might be able to try this out the next time he has a long rehab stay.
if you’re not in a destination city, it’s going to be hard imo to get AB&B rentals. Unless there’s like serious jobs, like due to big construction or fracking jobs. Otherwise it may be better posting onto a site like NextDoor or doing old school pin up listing in the break room of community college or local hospitals for folks needing affordable work week rental.
I do so love what your friend did to their garage. It could be just an ideal inexpensive solution. BUT, You might want to give them a heads up to find out as to IF the kitchen is a “true” kitchen for property taxes. Some places have it that if it is, that the garage actually can be a separate taxing unit for property taxes. So it’s not just a garage anymore. It’s a home. Yeah no fun there as they will have 2 improvements on their property tax bill... the house and the outbuilding with a bathroom AND kitchen. My moms old 1930-40’s TX neighborhood has narrow service alleys with alley entrance to yard & those double hung sliding door style wooden garages with most garages having the washroom (& water heater) and a separate entry guest room with full bath as mil or maids quarters. If you do a Reno & put in a kitchen, it’s then becomes a separate tax unit and there will eventually be a matchup by city / county as per permits filed. Really ask her to quietly find out as it could be a much bigger tax bill.
https://www.nolo.com/legal-encyclopedia/home-chapter-7-bankruptcy-32498.html
Can you call the lawyer who handled your bankruptcy for advice?
I think you’ve been given pretty solid advice from the AC “pros from Dover” group. TN suggestions on renting out a section of your home are beyond great. I think you need to really consider that as you do not want to loose your current home by foreclosure and have to find a rental as I think you will find that beyond challenging between pets and your hubs limited mobility. Landlords may view him as a risk to have as an occupant as he’s not ambulatory on his own. They’ll find a reason not to rent to you all and use the BK filing as a justification even tho it’s more likely they don’t want limited mobility w/health issues renter.
I’d like to add onto Tacys BK comments, that you should look at BK filing that was done to carefully review the reaffirmation. If you all had debt on a car or home and kept it even tho BK was done, there would have been a required reaffirmation document done on each asset retained. My understanding is that with “reaffirmation” the terms can be changed by the lender from whatever the original terms were IF the old lending was not subject to something federal (like FHA, VA or SBA type of mortgages). Like a bank held mortgage can put a hefty fee on a foreclosure after BK as the bank has to allow the reaffirmation if you are current but can add on ability to do huge butt fee should you not pay mortgage & default.... the monthly note itself may not change but the end game part might. Look at the reaffirmation to see if there’s anything like this for what you signed as a part of the BK.
I’ve never done BK but had friends & clients who have, mainly related to heavy borrowing due to Hurricane Katrina in ‘05 then dealing with economic downturn in ‘09/‘10 for our area. It really does seem to haunt you for a decade to be able to be ok for anything that can search your credit. Imo Tacys spot on abt maybe having to only do conventional mortgage for any future house buy.... and those can require 20% -30% down. That’s a lot of $$$. Conventional mortgage, I think, best on property that’s unique, like in historic or conservation zone so not easily worked for standard lending. But for normal house buy going conventional to me does not make sense.... who has 20-30% cash to tie up as a downpayment when you can do FHA at 3 or 5% although you do have to pay mortgage insurance I think till forever on FHA.
really do whatever you can to be current on that mortgage