A fundamental part of deciding to file bankruptcy is helping our clients achieve their financial goals. One of the toughest decisions clients struggle with is deciding whether to keep their homes. Many Californians are faced with underwater property values; denied loan modifications; falling behind on mortgage payments when their teaser rate terms end; and the fact that we live in a non-judicial foreclosure state where a home can be foreclosed without notice to the courts.
The short answer to this daunting question is Yes you can keep your home and file for bankruptcy. Under Chapter 7 liquidation bankruptcy, it is always recommended that you be current on your mortgage payments and have equity within the California Exemption limits. If you’re behind on your mortgage payments, the most effective way to deal with the “mortgage arrears”, as they are called, is to file bankruptcy under Chapter 13 where you get to make up those past due payments over a period of 3-5 years.
The deeper question is whether you’re trying to save the impossible American Dream of owning a home and at what price are you willing to pay to have it? Unless you’re stripping off a second mortgage and willing tolitigate against your loan servicer or lender on the securitized mortgage issues, then you may be better off walking away from your home completely because the values will increase over time, but this recovery will take a very long time; 10 years or more.
The numbers are staggering when you look at what you currently owe against a continuing decline in property values and what your home may be worth by the time you’re finished paying on that outrageous mortgage. If you’re determined, committed and willing to go the distance and keep your home, the most economical method of saving your home is by filing bankruptcy under Chapter 13 if you’re behind on your payments.