Foreclosure Scary: Can Bankruptcy Save My House?

(image credit:  dreamstime)

Bankruptcy!  I don’t want to file bankruptcy!

Hey, if you do want to file, there is something wrong with you.

But you want to keep your house?  Avoid foreclosure?

Which option hurts more:  losing your home, or, filing bankruptcy?

We humans make decisions based on our emotions:  we shy away (or run, if you are like me) from what hurts, and seek what gives us pleasure.

In spite of what I have had state court judges tell me, that there no longer is any stigma to filing bankruptcy, that is not how my clients feel.

It feels like a complete failure; breaking promises, dishonorable.

Some people cannot face the perceived shame of filing bankruptcy and kill themselves.

image credit: dreamstime
 

Not that anyone feels good about losing a home to foreclosure.

I am not emotionally invested in my client’s decisions on these matters, other than my strong desire that they benefit from my assistance.

Either way, you need to do the cold calculations, a real budget, how much do you have to work with, how much will it cost to do what you want to do.

There is always a  money trade off with these choices, for instance, if you meet with me and tell me keeping your house is priority number one, if I said would you pay $1 million dollars for your house, I bet you would say no.

In the old days, back when homes were worth more than we owed on them, (gosh, seems like a long time ago, doesn’t it?) most Chapter 13 bankruptcy cases were filed to stop a foreclosure and give you time to catch up on the missed payments, up to five years.

These days, most Chapter 13 bankruptcy cases are still filed to stop home foreclosure, but, in a quite different way:  lien stripping.

This option is only available if your home is worth less than what is owed on the first mortgage, and you have two, or more, mortgages.  Many of my clients are able to file a Chapter 13 payment plan, and make a plan payment that is equal to, or even less than, their second mortgage payment.

Which is scarier, foreclosure, or Chapter 13 bankruptcy?

Consult an expert bankruptcy attorney before you decide.