by The Berean 113 Replies latest jw friends
Millions are now facing the dilemma of making house payments on a property that is not worth what is being paid.
After originally promising to repay the bank, Is there a "moral" obligation to continue in a dwelling, even at a loss ... Or is it best to exercise the "legal" right of foreclosure and pay the consequences ?
If you can manage it, you are obligated to pay it. If I buy a car, and two years later it's not worth near what I agreed to pay for it, I still pay for it. You CAN walk away from it, but you shouldn't. You bought it to live in, not for a fast buck, right??
It depends. Instead of walking away, you might want to reorganize under Chapter 13 Bankruptcy. If you have a second mortgage on the house, and local rules apply, you may be able to lose the 2nd mortgage which will help you retain your home. A good attorney is valuable. Try to get one with at least 20 years experience. In a chapter 13 bankruptcy you can make payments to the attorney through the plan and so will only have to pay $500 (maybe less)plus court filing fees to get started.
If you reorganize, do not, I repeat, DO NOT go with a company that is advertizing on tv. They will rip you off thousands of dollars and not do a thing to repair your debt or credit score.
Just for your information, foreclosure does not cancel your debt. You can be chased by the bank after the foreclosure, your wages being garnished etc. etc. They may or may not; but you did sign a loan contract, so they can. A better solution is to talk to your bank, explain the situation which should include I am unable to afford my payments and don’t want to go into foreclosure or bankruptcy . Would you be amiable to accepting the proceeds of a short sale and legally releasing me from this obligation?
A short sale is simply a price below what is owed on the house. If they go with that, then you walk away from the house a free man . Your credit may or may not take a hit, but that is at risk.
Oh one more thing, the IRS may tax the difference between what was owed on the house and what it was sold for in the short sale. They look at it as income to you since it is debt forgiveness gift from the bank.
What is in it for the bank? They are saved the significant expense of a foreclosure and the expense of the damage to the house that always seems to happen just before the sheriff puts your belongings on the street.
Realtors love short sales and will help you make it happen. They get a house cheap and generally have a pretty good shot at working with the bank. I would consult a lawyer and or realtor if you are serious.
Freeman
You have a legal and moral obligation to repay the debt. The government has set up programs to help those who are unable to pay their payments. However, there have been no allowances made for those who are able to pay but don't want to because their home is worth less than it was when they bought it.
Large numbers of people are walking away from their homes because they can rent a similar house in the same neighborhood for far less than their mortgage payments and they are making the calculation that they would be much better off financially to lose their house and rent.
I have a friend who is underwater on two rental houses. -it's his own fault for refinancing and taking cash out of them 5 years ago. He could have paid them off in the last 15 years. His other place he could sell for a minimal profit, but he has sunk $50,000 from his retirement savings into that place, so it would all be lost. His retirement pensions don't cover his bills either. If he walks away from the rental houses the banks will likely get a deficiency judgement against him, too. He cashed in his 401K plan a year ago in an effort to keep his bills paid, so now he has no way to grub stake a new start. He will likely be bankrupt within a year and be forced to do what he should have done last year- walk away from the mortgages. By cashing in his 401K retirement he just delayed the inevitable by 18 months.
The banks rigged the whole home buying process to make profits for them, the realtors, the appraisers and seller. It was fraud, but it was legal fraud. My neighbor who is renting walked away from their house 4 months ago. They were $100K underwater and with only 7 years to go until retirement they felt they had to walk away and rent for $1200/mo less than their house payments. They couldn't afford those payments when they retire and if they can't sell it then, they would have 2 choices then- go bankrupt or never retire. They bought the house thinking that 10 years later they could sell it and make a huge profit. That just isn't going to happen for most people who are way underwater and are less than 10 years away from retirement.
you will be told by many that you have an obligation to pay your debt. The advice, although well intentioned, is just a blanket answer from an annonymous poster who does not know you or your personal financial problems. By following that advice, you could wind up in an even bigger financial vise.
Consult a bankruptcy atty. Be aware of your rights.
By following that advice, you could wind up in an even bigger financial vise.
This is not necessarily true. They may not be able to take equity out of their inflated value and buy some quads, but if they can pay, they should.
We don't know the circumstances, just the original question.
Here's one for ya:
A criminal has a "right" to a fair trial. It doesn't mean he is not a criminal.
One thing we have learned in this country is how NOT to be responsible for our decisions.
It is not a criminal act to declare bankruptcy. It is legal and sanctioned by the Federal government of the U.S.A. If he declares chapter 13, it will be overseen by a U.S. Trustee. He will be given a chance to re-organize and pay off his debt.
Really, Watson. Let's keep it in check here.
okay, luvubye.
I understand that Robdar.
