My house is in foreclosure. Can I save it?

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As an Asheville Bankruptcy Attorney, I regularly respond to questions posted on AVVO.com. I answered an interesting one about foreclosure today. Here it is:

“As [a] residential contractor suffering through the fall of the economy, my husband was forced to file bankruptcy in 2009. He was released from this in 2011. Ever since, we have tried relentlessly to work with our mortgage lender, JP Morgan Chase, to reinstate our mortgage, in order to keep the home. Every representative we have spoken to had something different to say. And, none of them gave us any answers or solutions to our situation. We just wanted to begin monthly payments, even if they were more than our original mortgage amount. The only suggestion we were ever given was to apply for a loan modification. We did this at least four times! Now foreclosure has been filed, and we just want to find a way to keep the property and make our payments.”

This was my response:

This is a difficult situation. As an Asheville bankruptcy lawyer I see this type of thing every week, if not every day. Construction work has dried up in our area over the past 5 years and is only now starting to come back. I’ve seen some very good contractors lose their homes because they simply couldn’t find enough work.

You indicate that you are willing to begin monthly payments, and even pay “more than the original mortgage amount” to save your home. Based on this, it may be possible to save your home.

Before I respond to whether you can save your home I have to recommend that you seriously consider whether it is worth it to save your home. Do you have equity in the home? Are your mortgage payments so good that you would be paying a similar amount to rent a comparable home? Do you have some familial attachment to the home? If you cannot answer “yes” to one or more of these questions then it may be a good idea to allow a foreclosure- simply walk away and move to a good rental house. In representing over 2000 bankruptcy clients over the past 14 years I’ve seen lots of people do everything they can to “save” a home that they probably should have walked away from. It can be VERY stressful trying to save a home that you can’t afford.

On the other hand, if you have a compelling reason for wanting to save the home AND you have sufficient income to make the normal mortgage payment, PLUS an additional amount to “cure” the arrearage (ie, the amount that you are behind) over a 5 year period of time, then chapter 13 bankruptcy may be the right option for you. A chapter 13 bankruptcy will “stay” the foreclosure action, allow you to resume normal monthly mortgage payments, and allow you to get caught up on past-due mortgage payments over a period of time- up to 5 years. It will also allow you to resolve other debt issues you may have.

I have addressed this issue before, in my blog about chapter 13 bankruptcy and foreclosure. I think that people automatically assume that they need to “save” their home. Sometimes, this is the right thing to do. However, it is not always the best idea. I encourage my clients to consider all of their option. In some cases, foreclosure may be ok. In fact, under the right circumstances a foreclosure followed by a chapter 7 bankruptcy can be liberating. If you are facing a foreclosure I recommend speaking with a bankruptcy specialist. A good bankruptcy attorney won’t recommend bankruptcy if it’s not in your best interest. More importantly, a really good bankruptcy attorney won’t recommend chapter 13 if your best option is to move from your home and file chapter 7. A really good bankruptcy attorney can assist you in saving your home if it is both feasible for you and a good idea.

At Kight Law Office we have been advising people who are facing foreclosure for almost 15 years. We look out for the interests of our clients and ask the hard questions to help them find the right solution. Contact us if we can help.

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