Before You Walk Away from Your Mortgage, Consider This

More and more people are simply packing their bags and walking away from their homes, convinced there's no better way to deal with underwater mortgages. While it's undoubtedly true that you should keep all your options open as you struggle with a dire financial situation, it's just as true that you should carefully consider all your options before acting.

Financial experts urge homeowners to consider all the alternatives before taking what might appear at first glance to be the most attractive one. Sure, if you owe more on your house than what it's worth on today's market, it's tempting to simply pack up your stuff and leave the house to the bank. But is it the right move in both the short- and long-term?

Here's a list of five options to consider before walking out on your underwater home and mortgage:

  1. Fresh set of eyes. Maybe you've spoken to an attorney about your situation, but was it a lawyer focused on bankruptcy and foreclosure? Some attorneys are suddenly behaving as if they've always done bankruptcies and foreclosure defense, but find yourself one with a track record and real knowledge of complex bankruptcy laws. In other words, get a second opinion.
  2. Fresh start. When you're getting that second legal opinion, find out if you are eligible for a Chapter 7 bankruptcy. It's the simplest way to discharge debts and get a fresh financial start. The means test is less restrictive than it was in the past: have another bankruptcy attorney examine your situation to see if you can unload debt including credit card debt, medical debt and other onerous obligations making it impossible to meet your mortgage payments.
  3. If not today, tomorrow. If you don't meet the bar for Chapter 7, discuss with the bankruptcy lawyers near me a Chapter 13 reorganization bankruptcy that can help save your home. Also, just because you don't meet the means test today doesn't mean you might not meet it soon if you restructure how you meet current bills.
  4. Chapter 13. It doesn't discharge debt the way a Chapter 7 bankruptcy does, but it might enable you to keep your home and other possessions by restructuring your debt and discharging some of it as you make affordable monthly payments over the next three to five years. Also, ask the bankruptcy lawyers near me about how a Chapter 13 bankruptcy might positively affect a second mortgage.
  5. There's no magic wand. Even after reexamining your options in a sit-down with a bankruptcy and foreclosure lawyer, you might find that neither Chapter 7 bankruptcy or Chapter 13 bankruptcy are right for you. If so, discuss with the attorney other available options, such as federal government help that might soon be forthcoming, mortgage restructuring and other possibilities.

If you face the possibilities of foreclosure or bankruptcy - or if you are considering walking away from an underwater mortgage - talk to a Memphis bankruptcy attorney who can assess your situation and explain your legal options.