Many people balk at the idea of foreclosing on their home. Is foreclosure always a bad idea? According to James Kutkowski, who runs The Law Offices of J. Kutkowski, Esq., it often makes a lot of sense — and cents. Kutkowski has more than a decade of experience both as a bankruptcy attorney and a debt collector, and knows both sides of the coin. He talks here about why accepting a foreclosure can help give you a fresh start.
It’s hard to ever say that foreclosure is a good idea, but for some people in some situations it’s better to let the go than continue to go on a downward spiral of financial turmoil.
In the great Obama recession of 2009 - 2010, a lot of people have seen their income cut in half. If your income drops from $100,000 to $50,000 a year, you’re in trouble. If you had a mortgage of $2,500 a month, that was probably workable making $100,000 a year. But it’s certainly not workable when you are making just $50,000 a year.
Unless there is equity in your home, it actually makes sense to let the bank take the property back. Once a home is foreclosed on, it will be sold at a sheriff’s sale. The house will probably sell for less than the amount owed, and the remainder is called a deficit.
In Pennsylvania, banks only have six months to sue for the deficit, and most of them don’t. The reason for that is most people who are foreclosed on do not have enough assets to justify suing them for the deficit on the mortgage, so in that case, the bank simply writes it off.
If the bank does try to chase you for the deficit, at that point, filing Chapter 7 bankruptcy, which requires that you liquidate your assets in return for debt cancellation, may be an option for you. But only an experienced bankruptcy attorney could let you know that for sure. Either way, if you can’t afford the home and can’t get a mortgage modification — where the original terms of your mortgage are modified to allow you to afford payments on your home — then foreclosure is a better option than just trying to hold off the inevitable while draining your savings.
If you are facing a potential foreclosure on your home, you’re not alone. So many people have suddenly found themselves on the path to financial ruin, looking at a mortgage that has gone up $500 or more overnight. So save your money, find a place to rent, and get on with your life. After all, it’s only a house. And a house can be replaced.
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. Publication of this article and your receipt of this article does not create an attorney-client relationship.
