M.P. asks from Wentzville, MO on April 25, 2012
Bankruptcy - Wentzville,MO
I have a good friend who in casual conversation one day, mentioned that they had not made their house payment in over 10 MONTHS! I was floored! I asked her how it hasn't been foreclosed on. She told me that they are in "active bankruptcy" and that as long as it is active, the bank can't take their home. I didn't want to press her for more details because I didn't want to be nosey but.....................truth be told I am nosey and would love for someone to explain how this is possible to me. One day can she come home and have a lock box on her front door? I don't see how someone could not pay their house for that long and not be worried. They don't seem worried in the least. If my water bill is a day late I am frantic. :) So, if someone can explain how having an "active bankruptcy" keeps a bank from taking your house so I can put my nosey brain to rest, I would greatly appreciate it.
Have a Happy Hump Day!!!
So What Happened?™
HMMMM......thanks for the responses. I know it is none of my business, I was just utterly confused. I know they are doing a "chapter 13" but, I don't know if their house is in it or not. All is very confusing. I guess I should just be thankful that I have not had to understand how all of it works.
C.B. answers from San Francisco on April 25, 2012
I've known people who didn't make a house payment for over a year. The house was in foreclosure, but the bank preferred for them to stay as an uninhabited house falls apart faster. At the end, the bank gave them like 2 weeks to vacate and paid them for the keys. (I guess there is a program with some banks to pay you like $1500 for the keys as long as you don't destroy the home. A lot of people were so angry they were literally destroying their homes when they left!)
So, it could be that the house is part of the bankruptcy or it could be that they are in foreclosure and the bank just hasn't kicked them out yet.
G.B. answers from Oklahoma City on April 25, 2012
If they are working through the court system with an attorney who helped them to file then they are getting legal advice as to how to handle this. They are probably doing just what their attorney told them to do. Their bank does not want that house. It will sit empty for months and months if not years. They don't want to have to take on paying someone for upkeep and yard care. They want the family to reconstruct their debt and be able to start making payments again.
I would say an attorney is helping them do what is legal in their situation.
D.B. answers from Dallas on April 25, 2012
The purpose of bankruptcy is to allow someone who can't pay their debts to restructure their debt (and sometimes dismiss some of the debt) so they can make payments without losing everything (house, car, etc). I'm pretty sure it also involves financial education classes, and developing a plan to decrease the odds of a reoccurrance. This absolutely kills your credit. Not an advisable course of action. It's better to live within your means to begin with. However, it can be helpful for people who encounter unforseeable tragedies that then impact their finances.
K.F. answers from New York on April 25, 2012
Even the foreclosure process takes a very long time. If you happen to fall behind in your payment you have about 3 consecutive months of falling behind before the banks will refuse to accept payments from you and even demand the balance in full. Filing all of the required paperwork with the courts takes time.
Bankrupcy isn't any different especially with so many foreclosures and bankrupcies happening at the same time the courts haven't expanded and can only handle x amount. While they work out the bankruptcy plan they get to squirrel away money because their mortgage company probably won't accept any payments from them.
Getting locked out of your home would go through the foreclosure courts and that takes time too.
M.S. answers from Kansas City on April 25, 2012
Interesting question as I wonder the same thing. Our neighbor across the street has not lived in the house since August 2011 because he could not afford his bills. From our understanding it is going through the foreclosure process but due to the shady mortgage company they went through no one can seem to find the correct documents that would allow the bank to take his home. We also found out (through a nosey neighbor) that he hasn't made a payment in 2 years, again, they can't find the correct paperwork to proce who actually owns the house. Odd and we can't understand how we work our butts off, maintain and update our house yet he hasn't done a single thing to it, he can't even live in it yet he still "owns" it. It is very frustrating . . . we have gotten the city involved because the house is falling apart and we want something to happen faster than it is. I wish I understand all the why's and how to's so I could better udnerstand why this is happening as it does affect our neighborhood.
S.S. answers from Cincinnati on April 25, 2012
I am going to guess that they have filed a chapter 13 bankruptcy. A chapter 7 is the other one (and there is chapter 11 which is for businesses). In the case of a chapter 7 bankruptcy an attorney would work with the companies they are in debt to, to lower the total cost of debt and then sell their house and spilt it up to pay off the debt. With a Chapter 13 companies can not seize property or press charges against you IF they are part of the bankruptcy. My husband and I are under a Chapter 13. However we own our house free and clear so I am not sure how house payments figure into it. I can tell you that secured debt actually lowers the payments of a bankruptcy and is allowed to be part of the debt listed. Is it possiable that the house is part of the bankruptcy? If that is the case they are making payments. My car is part of our bankruptcy (my only debt that is even on there) and instead of paying the credit company that gave me my car loan, we payment the bankruptcy trustee one lump payment every month and it gets spilt between our creditors. Bankruptcy is a horriable thing, If we miss a payment they could put a lien on our house and sell it even though we own it free and clear.