1) your payments are too high,
2) there is a tax lien on it, or
3) your loan modification was turned down.
In my last post I gave you three reasons to get advice from a competent Colorado Springs bankruptcy attorney before putting your house on the market. Here are three more. These can save you money, and help you make a better decision.
1. Payments are Too High: It makes sense to sell your house if it’s more than you need, or if you can’t keep up with the payments.
But here in Colorado Springs it might actually be better in the long run for you to keep the house, rather than selling it. Our prospects for long term growth are good, in which case your home should ultimately increase in value. Plus, you have to live somewhere and with rentals at near capacity, you could be stuck paying more in rent than your current mortgage payments.
In order to keep the house, you can either reduce the debt attached to it, or reduce other, unsecured, debt which will allow you to continue to make the house payments. In my last post, I listed several ways to reduce the secured debt on the house. To reduce the other, unsecured, debt you may want to consider filing a Chapter 7 bankruptcy. That way your other debt, like credit cards, pay day loans and medical bills will be discharged, allowing you to keep up with your house payments.
Even if you’ve never seriously considered filing for bankruptcy, you should at least be aware of the option in order to make a fully informed decision. In today’s housing market and with the overall state of today’s economy, it’s a good idea to keep an open mind on dealing with your debt.
2. Tax Lien: If you’re behind on old income taxes, the IRS may have filed a tax lien, securing that debt to your real estate. This might make you want to consider selling the house to pay off the tax lien.
But filing for bankruptcy under either Chapter 7 or Chapter 13 may be a better way for you to deal with the tax debt. Some older income tax debt may be discharged under Chapter 7. Under Chapter 13, you may be able to pay a lower amount, excluding interest and penalties.
An in-depth discussion of discharging income taxes is beyond the scope of this post, but if you are considering selling your house in order to deal with a tax lien, you should first at least find out how filing for bankruptcy would affect them.
3. Loan Modification Turned Down: Loan modification programs, both the federal ones like HAMP and the private ones, have been a source of great frustration to many homeowners looking for help. Often loan modifications are turned down because the homeowner left something off the application. Many times it’s not really clear why the modification wasn’t approved.
After jumping through all the hoops only to have your request denied, you might figure that you’d be better off just getting rid of the house. But sometimes filing for bankruptcy might actually help you get your loan modification approved. By getting your other debts discharged, you’ll have more money to make your mortgage payments, which might improve your chances for a loan modification.
Making the decision to sell your home should not be done lightly. As a Colorado Springs bankruptcy attorney, I often meet with potential clients who are considering selling their home. Oftentimes they are surprised to hear about other legal options that they may not have known about.
If you would like to know your options before putting your home on the market, please fell free to give me a call. I’ll be happy to discuss them with you.