Foreclosure in 97223>Question Details

dwc1917, Home Owner in Hillsboro, OR

Deed in Lieu vs. Foreclosure after Chapter 7 Bankruptcy

Asked by dwc1917, Hillsboro, OR Sat Jun 1, 2013

Filed chapter 7 in July of 2012. The bankruptcy was discharged in October of that year, and my Mortgage was sold to Selene Finance. The house was surrendered as part of the BR. I have been recently offered a DIL through Selene (administered by Green River Financial), but the language in the "agreement" gives me pause. Part of the agreement states I am to submit a W-9 for debt forgiveness. They also state that they will report the DIL to the major credit reporting agencies. Lastly, they state that they can cancel the offer at any time during the process. I had asked for $3500, which they agreed to, but 50% payable at receipt of signed docs, and the other 50% received when possession of property occurs and the house is in broom swept condition. There is no way I can get the property back to this condition! It needs a little TLC that I haven't been able to provide. Would rather take 1 check-sign-and walk(assuming language of agreement is altered). Wonder if this is possible?

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Should you file for bankruptcy before or after foreclosure? Sometimes you have no choice. But if you do, you will most likely benefit more if you file for bankruptcy before your house is foreclosed -
2 votes Thank Flag Link Tue Aug 18, 2015
Just thought you should know, "broom-swept condition" just means it has to be clean, not that you have to do any repairs to the property. You can probably get a dumpster from you city trash service (a small one) to do a "clean out" of any debris and garbage, for under $100. Then, give it a once over with broom and bucket, sponge, etc. That should be good enough to satisfy them for a "deed-in-lieu"...

It is common for you to have any debt forgiveness counted as taxable income, so that is what the W-9 is for. If you have tax losses for that year, though, you may be able to offset that... talk to your tax advisor about this. If you don't usually use one, it might be worth a few hundred bucks to use one this year, as this is kind of a special case, and may not be covered in the common "tax software" that is out there! Good advice can save you thousands, and you can't count on the IRS to tell you what you need to know!

As for your credit, the Deed in Lieu will show up as a "debt settled for less" than full amount owed... and there are worse things, so I wouldn't be too worried about that. I've heard that you can get a new loan within about 3 years of a bankruptcy, less if you can show a genuine hardship that caused it, like a medical problem, job loss, divorce, etc. The good news is that you can start rebuilding your credit immediately once the DIL goes through, so work with a good credit repair agency, or just do the things you need to do yourself. I've heard there is a "Credit Repair for Dummies" book out there that will walk you through it... one idea is to start a savings account at a local bank, put a few thousand into it, and then ask the bank for a "secured" credit card. Start using it for small expenses, like gasoline and groceries, and pay it off every month. After making regular payments (on time!) for six months, ask for a credit line increase, and just keep doing that. NEVER use more than about 1/3 to 1/5 of your credit limit, that will build your credit score the fastest.

Anyway, good luck with getting yourself re-established... bankruptcy and foreclosure are not the end, so don't get discouraged, it's supposed to be a new start, so stay positive, and work toward the day when you'll be able to buy another home! If I can help, give me a call!
2 votes Thank Flag Link Sat Jan 31, 2015
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0 votes Thank Flag Link Fri Jan 23, 2015
See a lawyer who specializes in chapter 7 bankruptcy, especially for the state you're in. I've heard good things from a friend about an attorney in Denver, but I'm sure there are plenty in Oregon to help you out.
Web Reference:
0 votes Thank Flag Link Tue Dec 3, 2013
I'm kind of in the same position, filed a chapter 13, then lost my job, gave the house up in bankruptcy, Chase started foreclosure, just sold it to Selene Finance and they are offering DIL, but they changed the move out date that we discussed, so I'm not signing yet, my BK is in the audit before discharge phase and I was assured by my lawyer the finance company couldn't come back on me. I want to know if Selene has to start foreclosure paperwork all over again, since Chase no longer services it. They told me they won't pay until the deed is in thier name and I'm not reading very nice stuff on the web about them and they are not BBB accredited does that matter?
0 votes Thank Flag Link Sun Oct 27, 2013
This is a site that will help you determine if you can qualify for a refinance after short sale, foreclosure, or filing bankruptcy. Check out
0 votes Thank Flag Link Sat Aug 17, 2013
I had a buyer that wanted to buy a home in Arizona, but he had a Chapter 7 bankruptcy 7 months ago.
After researching the web I found a loan program at, they allow a mortgage after a foreclosure.
There is only a six month waiting period. Good to see lending options coming back.
0 votes Thank Flag Link Wed Jun 26, 2013
Why don't you do a short sale? I've been very successful at assisting my Chapter 7 clients through a short sale option. They usually get a check at closing, too. A good tax professional can help you file the necessary tax form to avoid taxes on the difference if the home was your primary residence. Give me a call; I can help you get this sold and behind you! 503-580-2941.
0 votes Thank Flag Link Sun Jun 2, 2013
Please be advised that if you choose to just let the home go into foreclosure (this could take several months or even another year) the clock does not start ticking with regards to being able to buy another home until the Title passes. Therefore a DIL can be a great tool for a homeowner. Make sure you consult with an Attorney especially regarding the W-9 and any outstanding taxes and HOA fees. I can assure you that if you hand in a DIL, there are somethings that can't be discharged in a BK. Cover your bases, remember EVERYTHING is negotiable.

Best of Luck!
0 votes Thank Flag Link Sat Jun 1, 2013
BE CAUTIOUS! See a lawyer and or tax specialist. The W9 can mean you will be hit with the balance as pure, taxable income. The moretgage reliefe act may have nothing to do about it. Of course, youi can possibly claim hardship exemption to the IRS (Gestapo) if your debts exceeded the bills/debts. Your BK in the middle of this could possibly have harmed you---you need a specialist. Im sure your cerdit is already pretty bad so Id not care about the new loan ownewrs using that as a reason for yoiu to play ball with them. Remember---they do NOTHING unless its in THEIR best interest. Say that again to yourself 10 times then go see an atty.
0 votes Thank Flag Link Sat Jun 1, 2013
You already included this property in BK and were discharged in Oct. However, you are still on title and lenders need to do a foreclosure.
Definitely consult your attorney because if you sign their paperwork, you may be re-affirming the original debt. There is also legal counsel available in every community that charges you according to your income or pro bono if you qualify. Wishing you the best!
0 votes Thank Flag Link Sat Jun 1, 2013
I would contact the attorney you used for the Chapter 7 and inquire about your rights and obligations post bankruptcy. If you did not use an attorney, you should contact a bankruptcy attorney for advice. I would be happy to give you the names of bankruptcy attorneys if you need them.
0 votes Thank Flag Link Sat Jun 1, 2013
you need to speak with your bankruptcy attorney - if you sign anything regarding the mortgage or deed you could be responsible for the mortgage again - proceed with great caution and with legal guidance
0 votes Thank Flag Link Sat Jun 1, 2013
I would highly recommend you contact a Real Estate Attorney to help you with this. Realtors are not legally allowed to give out legal advice, and it looks like you could definitely use some professional legal advice. Good luck! Feel free to contact us if you need a recommendation for an attorney.

Mandy Lewis and Jennifer Peterson
Keller Williams
0 votes Thank Flag Link Sat Jun 1, 2013
This is pretty complicated and a little confusing. If the house was surrendered as part of the BK, have you already given up possession? The DIL being offered is slightly better than an outright foreclosure on your credit, but your credit is already pretty much destroyed by the BK and I assume delinquencies in payments.
The w-9 for debt forgiveness is standard and will be reported as income. However, check with your accountant. As part of the Mortgage relief act, there should be no tax consequences for the debt "income". It's a technicality.

What is more important is that Selene Finance agree to call the debt forgiven completely with NO ability to come back after you for the deficiency at a later date. Again, this should be part of the Oregon statute, but I'm not an attorney and can't give you legal advice.

As for "broom swept" condition, they mean they want the house clean, even if there are repairs that are required. They want no trash left, and they don't want all appliances removed, etc. I would double check that clause again - but if they have mountains of trash, furniture etc to remove, that will cost them, and I think that's what they are trying to avoid.

I hope this helps. There's a lot going on here - so I would double check to make sure you understand all their terms completely.
0 votes Thank Flag Link Sat Jun 1, 2013
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