Should I Walk Away From My Mortgage, File Bankruptcy Or Do Both?

The number of homeowners facing foreclosure remains elevated despite hopes that the housing market was recovering. Many homeowners who are months or even more than a year delinquent on their mortgage payments fear an eviction could come any day. But many of the homeowners facing foreclosure wonder if they should walk away from their mortgage, file bankruptcy or do both. Below are a few things homeowner’s should consider before they take action.

How Far Underwater Is Your Home?

If you’re like most homeowners facing foreclosure, your home’s value has been dropping steadily over the past three years. If your mortgage dwarfs the value of your home and you have a large negative equity balance, you need to determine if the mortgage company is willing to come after you for the difference. Even if the home is sold via foreclosure, it’s likely it will be sold for a lot less than your mortgage.

The mortgage company has the right to come after the homeowner for the balance; but if the debtor just doesn’t have cash the company might not see any value to sending it to collections. However, the debt may come back to haunt the homeowner once they do get on their feet. If they file bankruptcy, any deficiency balance left over from the foreclosure sale would be wiped out.

Do You Have Other Financial Troubles?

If your home is your only financial problem and you have no other debts, then filing bankruptcy might not be the best option. However, if you’re like most homeowners facing foreclosure, you probably have maxed out credit cards, have a delinquent car loan and/or other debts threatening to crash in your financial house of cards.

If that’s the case, then filing bankruptcy could really give you the clean break you’re looking for by walking away from your home. A debtor can surrender their home in bankruptcy and even wipe out unsecure credit card debts. And the good news is that any debt wiped out in bankruptcy cannot be taxed by the IRS.

Facing Foreclosure? We Are Here to Help

If you are facing foreclosure and need some assistance we are always here to help. If you would like to to set up a free consultation about your situation feel free to contact us today.