Get advice if 1) you can’t afford your house payments, 2) it has an income tax lien, or 3) your mortgage modification was rejected.
The last blog gave three reasons why you should get advice from a bankruptcy attorney before selling your home. Here are three more. They will help you make better decisions about your home, and could save you lots of money.
1. If you think you can’t afford the house payments:
You may really need to sell your home if it’s more house than you need, or its cost is way beyond your present financial abilities.
But, if you would greatly prefer to keep your home, and wish there was a way to do so, you may be able to. You may be able to reduce your home’s monthly cost, and do so even if you are under threat of foreclosure. Or you may be able to afford your present monthly cost, or a reduced cost, if no longer had to pay all or most of your other debts.
Last week’s blog gave you some ways to reduce the debts on the house itself (second mortgage lien “stripping” and judgment lien “voidance”), and next week’s will give some more.
As for reducing or getting rid of the rest of your debt, even if you don’t like the idea of filing bankruptcy you should find out your options. Especially with home prices starting to rise now in most parts of the country, now could well be the best time to use some of the extraordinary tools of bankruptcy. For example, if your home is “underwater” (you owe more than it’s worth), with a second mortgage “stripping” you can take advantage of the last half-decade’s loss of equity in your home, which likely you would not be able to do in a year or two if values continue to rise. If home values are rising, you may also want to consider bankruptcy before there is more equity in your home that you state’s bankruptcy exemption laws allow.
2. If you have income tax debt:
If you owe back income taxes, these taxes may have already attached to your home’s title through the recording of a tax lien. Or that may happen soon. With that tax lien or fear of one arriving, you would understandably feel some pressure—especially when combined with financial pressures on the home from other sources—to sell your home to pay those taxes.
But bankruptcy can often help you deal with your tax debts, often in surprisingly beneficial ways. Some income taxes—usually if they are old enough—can be forever “discharged” (legally written off) altogether. And those that can’t be discharged would likely be able to be paid much less than they would outside bankruptcy, through huge savings in interest and penalties, and other possible advantages. Tax liens in particular can be handled much better within bankruptcy. And most importantly, you and your home can be protected throughout the time the taxes are taken care of, taking away much of the pressure for you to sell your home.
So if income tax debts or tax liens are part of why you feel you must sell your home, first find out how bankruptcy would handle them.
3. If your mortgage modification application was rejected:
Although arguably the processing of mortgage modifications has improved over the last couple of years, they often continue to be a terribly frustrating procedure to go through. There are definitely times when mortgage modification requests are rejected because the homeowner failed to fully complete the application or the mortgage lender did not process it accurately. It may not even be clear why the modification was not approved. After going through this challenging process without a reduction in your mortgage payments, understandably you may well feel like you have no choice but to sell your home because you can’t afford it.
However, sometimes a bankruptcy filing—either Chapter 7 or 13, depending on the circumstances—can help get a mortgage modification approved. Reducing your debts through bankruptcy provides you more resources to put into your house, generally making you a better candidate for mortgage modification.
Deciding whether to sell your home of course involves many factors—personal, financial, and legal. Based on these last two blogs you can see that there are tools to help you keep your home—either for a limited period of time or permanently—that you likely were not aware of earlier. And these are just a few tools (with a few more next week), and they are just being discussed in general terms. Consider how much sense it would make to have your own unique situation be carefully reviewed by a competent attorney, resulting in a game plan designed to meet your personal needs and goals. You may be pleasantly surprised by the options and advantages that would apply to you. Let us help you make an informed and wise choice about your home.