Are you one of the thousands of people across the country who got caught up in the turmoil of the home mortgage meltdown? Are you afraid of losing your home and wondering what to do? First ask yourself whether you want to save your home or whether you are willing to let it go.Â Whichever decision you make, bankruptcy can help you and your family with a fresh start.
If You Want To Save Your Home
If you want to save your home, you have a number of options. You can work directly with your lender to renegotiate the terms of the loan to lower your payments. But remember, while it may be in the lender's interest to work with you, they are not required to do anything. Furthermore, you'll have to demonstrate some kind of "financial hardship" first-- and it could take months to get a final decision.
Bankruptcy is often a better solution. A Chapter 13 can stop a foreclosure and allow you to repay missed payments through an affordable repayment plan.Â You'll be able to get back on track with your mortgage and get rid of costly credit card debt at the same time. Â This will free up your finances, making it less likely that you will get behind in the future.Â And if your home is worth less than your first mortgage, bankruptcy can completely wipe out that expensiveÂ second orÂ third mortgage.Â Â How about that?
If You're Unable Or Unwilling To Save Your Home
If you're unable or unwilling to save your home, you might be tempted to simply let the property go into foreclosure. Without further action, this can be a costly mistake. In some states, if the property is sold in foreclosure for less than what you owe on the loan, the lender can come after you for the difference. If the lender does not come after you, it will cancel the remaining debt, and this is treated as "income" for tax purposes. The federal government recently passed legislation allowing individuals to exclude such canceled debt from their income, this protection will end with this tax year. And, even if you can exclude it under federal law, your home state must have similar legislation on the books for you to avoid state income tax liability. To date, many states have not passed such laws.
Bankruptcy can help protect you from these potentially devastating consequences of a foreclosure. It will address all of your outstanding debts, instead of just your home mortgage. It will also protect you from any potential liability for a deficiency on the loan, including tax liability. Finally, because a bankruptcy gets rid of your other debts, you can start rebuilding your credit rating quickly and efficiently.
The moral of the story? Don't just let your mortgage lender foreclose on your family's home. Call a bankruptcy attorney first.