Upside Down Mortgages: How Do I Get Out?
The housing market can fluctuate wildly. What may have looked like a good investment when you moved in can now look like an unending nightmare. Your home may have lost so much value that you now owe more on the house than what it is worth – even though you may have been paying the mortgage for years.
Such “upside down” mortgages are not uncommon. You can’t sell the house to get out of your mortgage – unless you have a stash of money you’re willing to throw at what has already become a bad investment – so what do you do? Talking to a Gilbert bankruptcy attorney may be the solution. Here are a few of your options for dealing with this situation:
Abandon The MORTGAGE
Arizona has an anti-deficiency law like many other states that protects homeowners from a deficiency judgement if they walk away from a mortgage. In other states, the lender would be able to sue the homeowner for the difference in the amount owed and the amount recovered at sale. But Arizona protects delinquent homeowners from such judgements. Therefore, if you can no longer pay your mortgage and you know you can’t recover what you owe at sale, you can choose to just abandon the home and the mortgage.
Know that this action will cause a hit to your credit. You will also be responsible for HOA fees, property taxes, and other fees while you are still the legal owner of the house. If the lender is slow to take possession of the title, you could end up owing a lot to various agencies.
You may not want to abandon your home, or you may feel like the value of your home will recover, so you want to hang on to your loan. Yet you may be having a hard time making the payments. You may be able to have your loan modified so that the term is extended and you make a lower monthly payment.
If the value of your house has dropped or you are having money problems, you may have a hard time convincing a lender to refinance. Know that you will also pay a fee for the privilege of refinancing.
SHORT HOME SALE
Instead of waiting for the bank to seize and sell your home, you can sell it yourself in a short sale. You would sell the house for what you can get, which will be less than what it is worth, and the bank will agree to forgive the difference that you owe.
Surrender a Deed In Lieu Of Foreclosure
Instead of just walking away from the mortgage, you can try to arrange to surrender the deed in lieu of going through the foreclosure process. The bank is unlikely to agree to this unless you have already tried to put the home on the market and had it there for some time. However, if you are insistent in your inability to pay, you will likely get the lender to agree so they can save money on the legal proceedings of foreclosure.
File For Bankruptcy
You have two strategies for dealing with your mortgage through bankruptcy. You can file for Chapter 7 bankruptcy, which will discharge all of your unsecured debts, such as credit cards. Chapter 7 bankruptcy will not discharge your home loan, as it is secured by the value of the property. However, it can clear up enough of your other debt that you have enough money to pay your mortgage each month and even catch up on what you may owe.
If you are unable to file for Chapter 7, or if it does not meet your financial needs, you can file for Chapter 13 bankruptcy and get your debt reorganized into an affordable payment plan, including anything you are behind on your mortgage. The repayment plan is designed to last three to five years. At the end of that time, you may be able to “strip down” your mortgage and have the amount that is in excess of your home’s value discharged.
Call a Bankruptcy Attorney In Gilbert, AZ
Talk to a bankruptcy attorney about your options for taking control of your finances and your upside down mortgage. You may be able to get debt relief without having to go through the hassle of selling your home or having it seized. Call Gilbert Bankruptcy Lawyers today to talk with an experienced bankruptcy attorney and learn about your options. We’ll review your finances and talk about your goals for your home to help you understand the best way forward. Call us today to schedule a free consultation and learn more.