If you’re like many first-time buyers in America who bought their dream houses five or ten years ago with the idea that the purchase would help obtain the American dream, you may be currently asking, “What was I thinking?” The truth is that when you met with your lender’s representative during your house hunt, you were probably fairly convinced that managing your mortgage would be a breeze. Now, however, you’ve come to the realization that you really can’t afford your home.
Foreclosure is no longer an uncommon occurrence across the country. What’s not too common, unfortunately, are homeowners who proactively look for ways to solve their financial problems and save their homes from foreclosure. Without taking action and hiring a bankruptcy lawyer, a foreclosure can go through in as little as three or four months, explains attorney Drake Ozment, a Chapter 7 bankruptcy lawyer in Palm Beach, Florida. On the other hand, because your attorney is familiar with the appropriate paperwork and motions to be filed, you can expect to have that three month timeframe extended to a year or two. This will give you the time you need to sort out your finances and decide if your home is worth keeping.
Prior to hiring a bankruptcy lawyer, Ozment says that some homeowners try to solve their problems by negotiating a loan modification or short sale. However, he never advises clients to try either of these routes because they are typically not in the best interest of the homeowner. Instead, they are only temporary band aids that mask your problem instead of solving it. When a home has depreciated significantly in value, Ozment explains, it is very unlikely that you will see it bounce back in your lifetime—so waiting and hoping for the best is not a viable option either.
When discussing options with an attorney, Ozment says that the conversations tend to ultimately come down to deciding if the family should try to keep a home that has enough equity, or consider walking away from the home if there is no value. This is an extremely difficult decision for many people, and one that your lawyer can help you view from many different angles.
For those who choose to keep their homes by filing for Chapter 13, Ozment says that many are taking advantage of the option to strip their second mortgages if there is no equity attached to them. This frees the homeowner of thousands of dollars and allows her to focus on paying just one mortgage each month.
For instance, he explains, if you have one mortgage for $100,000 and a second mortgage for $50,000, but your home is only worth $90,000 now, then there is no equity attached to the $50,000 mortgage. Therefore, with the help of an experienced attorney, you will be able to strip the second mortgage on your home, thus lowering the amount of money you owe by $50,000. To be clear, Ozment reiterates, this is only an option when you file for Chapter 13 bankruptcy and is not something that a homeowner can take advantage of without filing a petition first.
To learn more about the options available to you through bankruptcy, Ozment recommends contacting a bankruptcy attorney in your area who will be able to address the specific factors of your financial situation.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Neither publication of this article nor your receipt of this article create an attorney-client relationship.