One thing I have noticed about housing in Indianapolis is that there are a LOT of production neighborhoods. These are neighborhoods where every house basically looks like the one next door. They are also sometimes called cookie-cutter neighborhoods. These neighborhoods were popping up all over Fishers, Noblesville and Indianapolis in the early to mid 2000s. In my experience as a bankruptcy attorney in the Indianapolis area, these neighborhoods seem to have taken a big hit in the housing crisis. At Halcomb Singler I have many bankruptcy clients who, unfortunately, bought their production homes at the peak of the market and now owe way more than their production home is worth.
I am not saying that you are a good candidate for bankruptcy just because you are upside down on your home. Chances are that if you bought your home between 2000 and 2007 you are upside down on your home. Owing more than your house is worth in and of itself is not a good reason to file bankruptcy. However, if you find yourself upside down on your house, carrying significant credit card balances, behind on your house payment or car payment, etc., then you may be a candidate for Chapter 7 or Chapter 13 bankruptcy.
If, after meeting with a qualified bankruptcy attorney, you decide that you do want to move forward with filing a bankruptcy you will need to decide whether you want to keep your house or surrender it. In a Chapter 7 bankruptcy you are given the option of reaffirming your house. This means you sign a contract with the lender stating that even though you could surrender the house that you want to keep it and will continue to make the payments. If you fall behind on the mortgage after signing a reaffirmation agreement you are personally liable for any deficiency if your house is sold at sheriff sale. On the other hand, if you do not sign the reaffirmation agreement then you are no longer personally liable on the mortgage debt.
Before you file bankruptcy you should have a plan regarding how you are going to come out of bankruptcy in a better position financially. This plan should include a good hard look at whether it makes financial sense to keep or surrender your home. In my experience most people really do not have a good idea of the value of their home. We always think our own home is the best on the block and that people will pay more for it. Since we cannot always gauge the value of our own homes appropriately, I suggest asking a local real estate agent for the value of the home. Real estate agents routinely prepare a market analysis for those thinking about selling a home. It is important to ask the real estate agent's opinion regarding what he or she believes the house will actually sell for, not just what the initial listing price.
If the real estate agent tells you the home would likely sell for $100,000.00 and you owe $125,000.00 then my advice would be to let it go. After the fees and commissions associated with selling a home, it would take approximately $35,000.00 to sell the house. You could wait it out and continue to make the mortgage payment for the next 10 to 15 years so that you are able to sell the home without bringing money to the table....but do you want to live there for another 10 to 15 years? These are all things to take into consideration.
In addition to the value of your house related to the debt you should identify whether your house is the reason you are having financial problems. If your house payment is too high and you were forced to use credit in order to make ends meet as a result of the house payment, then it might make sense to surrender the house. On the other hand, if you have always been able to make your house payment without trouble and a sudden medical event caused your need to file bankruptcy you may want to reaffirm.
I don't mean to beat up on homes in production neighborhoods. These homes can be great. They can also fit into a family budget. But their values seem to have been hit the hardest by the housing downturn. This does not mean no one should reaffirm on a production house. It just makes sense to logically look at the pros and cons of both sides when determining what to do with a production house. Your bankruptcy attorney can give his or her opinion, but at the end of the day it is your decision.
If you are searching the internet looking for answers to your financial problems and are considering bankruptcy please feel free to contact my office. I often tell people it does not make sense for them to file bankruptcy. I can answer your questions concerning bankruptcy. There is no fee for the initial appointment. Call 317-575-8222 for your appointment at Halcomb Singler's Carmel, Indiana office or click here.
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.
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