Why You Should Stay in Your House Even if You Can't Pay Your Mortgage

Submitted by Rachel R on Thu, 08/07/2014 - 1:09pm

Why You Should Stay in Your House Even if You Can't Pay Your Mortgage

Why you should stay in your home even if you can't pay your mortgage

Image source: Flickr Creative Commons User Diana Parkhouse

If you can't afford to pay your mortgage payments and know you won't be able to get caught up, bankruptcy can be an excellent way to shed that debt, related debts and unsecured liabilities so that you can get a financial fresh start. But it's important to know that even if you stop making mortgage payments, you should absolutely not move out of your house. If you move out sooner than is wise, you can end up getting yourself in much worse financial trouble.

How Mortgage Differs from Rent

If you stop paying your rent, it's a pretty simple matter for your landlord to evict you and they can do so with minimal notice. But because you're the property owner, you will have a much more flexible time frame. Your lender doesn't own your home, they simply have rights to it as collateral for your loan. When you don't pay your mortgage payments, the lender files a foreclosure.

This triggers a sale of your home to satisfy the debt. What usually happens is that it's the lender that buys the home at the sale if the home has some value. Once the home sells at the foreclosure auction, there is a new property owner and it is up to them to serve you notice of eviction. This entire process can take months or even a year or more and leaving before you have to is a risk.

Don't Leave Your Home Until the Last Moment

If you leave before your home has gone through foreclosure and the new owner (the bank or someone else) has demanded that you leave the property, you can still be liable for what goes on there. If you have a homeowner's association, they can charge fees if the property isn't kept up to community standards and some municipalities assess fines for overgrown yards or homes in disrepair.

By staying in your home, you can make sure it's kept up and that there are not fines accumulating. Not only that but because you're not paying your mortgage and not paying rent on a new place, you can sock money away for a deposit on a rental home or apartment, moving expenses and utility deposits. You may want to go ahead and pay your homeowner's association fees, though, even if you're not paying the mortgage so they don't try and get a judgment and put a lien against your bank account.

Why It's Wise to Postpone Bankruptcy Until After Foreclosure

Some consumers that are behind on their mortgage payments will file bankruptcy to try and stop foreclosure, but if you can't afford your house, you're just postponing the inevitable. But here's the kicker, if you file bankruptcy, that will postpone the foreclosure and impact the debts that you've already amassed.

But debts associated with your home, like homeowner's association fees, that continue to amass after your bankruptcy but before the foreclosure will not be covered by the bankruptcy so you will end up out of your home eventually and with a pile of debts that you won't be able to escape because you can't file another bankruptcy until after a significant waiting period.

To find out more about bankruptcy, foreclosure and the best timing to file a Chapter 7 or Chapter 13, contact the North Carolina bankruptcy experts at the law offices of John T Orcutt for a free consultation on your debt dilemma.

Debts Hurt! Got debt? Need help? Get started below!

Serving North Carolina

  • Charlotte
  • Fayetteville
  • Durham
  • Wilson
  • Greensboro
  • South Raleigh (Garner)
  • Southport (Phone Consults)
  • Wilmington (Phone Consults)

North Raleigh

6616 Six Forks Rd Suite 203 Raleigh, NC 27615 North Carolina

Tel: (919) 847-9750

North Raleigh

Charlotte

7400 Carmel Executive Park Dr Suite 105 (In affiliation with Jack G. Lezman, PLLC) Charlotte, NC 28226 North Carolina

Tel: (704) 318-2702

Charlotte

Fayetteville

2711 Breezewood Ave. Fayetteville, NC 28303 North Carolina

Tel: (910) 323-2972

Fayetteville

Durham

1738 Hillandale Road Suite D Durham, NC 27705 North Carolina

Tel: (919) 286-1695

Durham

Wilson

2215 Nash St. NW Wilson, NC 27896 North Carolina

Tel: (252) 234-9194

Wilson

Greensboro

600 Green Valley Road Suite 210 Greensboro, NC 27408 North Carolina

Tel: (336) 542-5993

Greensboro

South Raleigh (Garner)

143 Highway 70 Garner, NC 27529 North Carolina

Tel: (919) 747-4400

South Raleigh (Garner)

Southport (Phone Consults)

4320 Southport Supply Road SE Suite 300 Southport, NC 28461 North Carolina

Tel: (910) 218-8682

Southport (Phone Consults)

Wilmington (Phone Consults)

4320 Southport Supply Road SE Suite 300 Southport, NC 28461 North Carolina

Tel: (910) 447-2987

Wilmington (Phone Consults)