Should I Keep My House or Let it Go in the Bankruptcy?

When clients come in to my office to file bankruptcy in Orlando or my offices in Kissimmee or Clermont, often times they ask me whether it is in their best interest to save their home. Usually the home is several months behind in payments. And yes there is a particular kind of bankruptcy – a Chapter 13 which enables you to (1) catch up your payments in your home; (2) modify your first mortgage to 31% of your gross income, and (3) even eliminate the second mortgage on your home. Nevertheless, most people have an emotional attachment to their home and I understand it. I did too several years back when I let a house go in a bankruptcy. If the house is so upside down that even if we are able to strip a second mortgage and/or modify the loan, I recommend walking away from it. It just does not make sense to keep the home unless of course the bank were willing to reduce the amount you owe on the home to fair market value which does not happen often. Sometimes with foreclosure defense, we are able to keep the client living in the home for possibly another couple years after the bankruptcy. As cold and harsh as it sounds, if a client realizes it is just stucco and paint and they WILL BE ABLE to buy another house in the future, they are willing to reason and decide that is in their best interest to let the house go. Sometimes people come and see me just to hear it from the horse’s mouth. I understand and empathize with this decision and do not take it lightly.

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