If you can’t make your mortgage payments, and can’t decide whether to try a short sale or allow the mortgage company to foreclose, a new development may help you decide on a short sale rather than foreclosure. Either way, you should consider what filing bankruptcy can do to turn your financial difficulties around.
According to Les Christie, reporting for CNNMoney.com on March 29, 2010, beginning April 5 of this year, the government Home Affordable Foreclosure Alternatives program will provide incentives for both the purchasers and the lenders in short sales of residential homes [click here]. This new program should increase the likelihood of a short sale being successful, and may provide a benefit to you as well – allowing you to purchase a home sooner in the future.
The process of completing a short sale of a home is not simple. The owner, typically with the help of a realtor, must locate a potential buyer willing to buy the home. Then the owner must attempt to get the mortgage company (or companies) to go along with the short sale. If there are two mortgages against the property, and if the sale proceeds would be sufficient to pay off the first mortgage but none of the balance owing on the second, it may be extremely difficult to get the second mortgage company to go along with the short sale, unless the owner remains on the hook for the balance not being paid off through the short sale. The incentives of the new program may well change the position that second mortgage holders have taken in the past, and they may now agree to the short sale without a requirement that the owner remain liable for the balance not paid through the short sale.
If your home is sold by foreclosure rather than by short sale, you will remain liable for the amount of the mortgages are not paid off as a result of the foreclosure sale, and your mortgage companies could attempt to collect from you this deficiency balance.
If you are behind on your mortgage payments, you should consider whether filing Chapter 7 bankruptcy or Chapter 13 bankruptcy would help you recover from your financial difficulties. Filing Chapter 7 bankruptcy will not usually allow you to keep your home. Filing Chapter 13 bankruptcy may allow you to keep your home, provided your income is sufficient for you to catch up all the mortgage arrearages over time while continuing to pay your regular mortgage payments every month.
Whether you are able to sell your home through a short sale or your home is sold through a foreclosure, I would strongly recommend that you schedule an appointment with me to discuss your problems. You owe it to yourself and your family to review your finances to see whether filing bankruptcy would benefit you. Call me today at 293-2392. You’ll be glad you did.