Can You Declare Bankruptcy If Your House Is Underwater?

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Can You Declare Bankruptcy If Your House Is Underwater?

If the value of your home is worth substantially less than what you currently owe on your mortgage, you may wonder if you can declare bankruptcy soon. If your home's mortgage is underwater, and you owe a significant amount of money to other creditors, then it may be in your best interest to declare bankruptcy. However, you want to speak to a bankruptcy law attorney before you make a decision. Learn more about underwater mortgages and how a bankruptcy attorney may help you below.  

What Does Underwater Mean?

When the fair market value of a homeowner's property falls below the amount they owe on their mortgage, the mortgage becomes underwater. Underwater mortgages can create many problems for homeowners. Homes with underwater mortgages can be nearly impossible to sell or refinance over time. The mortgages may force some homeowners into foreclosure.

Foreclosure can wreak havoc on you financially, even if you voluntarily return your home to a financial institution. A financial institution can pursue payment for a foreclosed home before they attempt to sell or auction it off to another buyer.

If you can't make the payments or meet the demands of a financial institution, they sell the home or place it up for auction. If a financial institution doesn't receive the entire amount owed on the home's mortgage, they can sue you in court to receive the rest of what you owe them. The lawsuit may place a great strain on you, especially if you owe other creditors money as well.

You can see if declaring bankruptcy can help you overcome the issues above. But you must first call or contact a bankruptcy attorney for assistance.

What Should You Do Now?

A bankruptcy attorney will need to compare your mortgage payments and other expenses to your current income before they help you declare bankruptcy. If your current income is substantially lower than your expenses, you may qualify for Chapter 7 bankruptcy. Chapter 7 allows you to dismiss all or almost all of your bills and other expenses.

If your income is enough to repay your creditors for less than what you originally owed them, a lawyer may suggest you declare Chapter 13. Chapter 13 bankruptcy also allows you to keep some of your property while you repay your creditors.

You may or may not be able to lower the mortgage expenses for your home with Chapter 13. If an attorney can't negotiate a lower amount with your financial institution, they'll ask the bankruptcy court to dismiss the entire amount for you. 

You can learn more about underwater mortgages by contacting a bankruptcy lawyer today.

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Identifying Real Estate Challenges After I began saving for a house, I realized that there were a few issues I was overlooking. For starters, I knew that I didn't have the skills to quickly and efficiently evaluate a real estate contract, so I began looking for a great real estate attorney. After an exhaustive search, I was able to find a lawyer who really understood what I needed. It was really fascinating to see just how much they were able to help, and within no time, I was on the road to home ownership. I wanted to create a blog that centered around real estate contracts, so here you are.