After the decision to file bankruptcy has been made the next decision is often whether to keep the house. This is a very difficult decision and not one that should be taken lightly. At Halcomb Singler I counsel clients regarding whether or not to surrender their home in many bankruptcy cases. I recognize that it is an extremely difficult decision for debtors who decide to surrender their homes. However, I encourage debtors to think about life after bankruptcy when making this decision and to strive to take as much emotion out of the decision as possible. But what should debtors take into consideration when attempting to make this very difficult decision?
First and foremost I believe that debtors should take a good hard look at their budget and determine whether or not they can afford the house moving forward. It is important to think about not only the mortgage expense itself, but the costs of owning and maintaining the house. I find many debtors focus on their mortgage payment and think they should keep the house because they would pay just as much money in rent as the mortgage payment. While this is often true, it is important to remember that when you rent you don't have to pay to replace the dishwasher or paint the exterior. The expenses of maintaining the home should not be taken lightly because it is often these expenses that cause financial hardship. I urge debtors to keep in mind that they want to start off on the right financial foot after bankruptcy and if it is clear that they will not be able to maintain the home and make the payment that surrendering should be seriously considered. The last thing that you want is to end up in debt again in the future because a house is dragging you down.
Another factor to take into consideration is whether your home is under water. To be under water means that your house is worth less than you owe. Make sure that you are not adding sentimental value to the worth of your home. If possible, have a real estate agent pull comps or do a market analysis on the property. If you are significantly under water you should seriously consider surrendering the property. Keep in mind that none of us really know what will happen with the real estate market here in Indianapolis (or anywhere else really), but I wouldn't expect a $30,000.00 increase in the value of a $100,000.00 house in the next 5 years. Also keep in mind that if you are thinking that a move may be necessary for work or any other reason in the short-term that you will not be able to sell your home without bringing money to the closing table if you are under water.
In my opinion, the hardest thing for people to do when they are trying to make the decision of whether or not to keep their home is to take the emotion out of the decision. To some extent, this is an impossible feat. There is going to be emotion involved in this decision. However, it is important to remember that a house is made out of boards and drywall. The place you live with your family, where ever that may be, is your home. Your children can still be happy in a rented house. In my opinion, your kids will be happiest when you are happiest. If surrendering a house and freeing yourself of the stress that comes along with paying the mortgage and those unexpected expenses of homeownership are will make you happiest then your kids will notice.
I have spent this blog focusing on the reasons to let a house go and I want to stress that this is not the only option. There are many circumstances where it is a great idea to keep the house. If you have a fair amount of equity that is exempt in a bankruptcy proceeding, you are current on the payments and you have sufficient income to keep up with the mortgage payments and expenses without much trouble after the bankruptcy petition is filed then it makes sense to keep, or reaffirm, on the mortgage debt.
As I stated at the beginning of this blog, I believe that the decision of whether or not to keep a house is the second hardest decision for a debtor to make (next to deciding to file bankruptcy in the first place). An attorney who practices bankruptcy law should be able to make a recommendation regarding whether it is best to surrender your house. However, the final decision rests with you and it is important to make an informed rational decision that will help you recover financially after bankruptcy. If you live in the Indianapolis area and would like to meet to learn your options regarding debt settlement or bankruptcy call my office to schedule an appointment at 317-575-8222 or click here. There is no fee for this consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
No comments:
Post a Comment