A LOT of homeowners who are behind on their mortgage payments are asking me: Is it better to lose your house to foreclosure or file for bankruptcy protection and try to save it? What are the effects of both on my credit? Will I be able to buy another home again with a foreclosure or bankruptcy on my credit record? These are important questions to ask yourself if you are in this situation. But I think that the more important question to ask is: What is the most realistic option I have under the circumstances and do I have any contingency or back-up plans if things don’t work out as expected? In other words, should you hope for the best but still prepare for the worst? In life, there are no guarantees.
The first thing you need to do is to take a good, hard and long look in the mirror and ask yourself if you can really afford to keep your home. Some people are simply unrealistic about their situation and so they end up making the wrong decision. For example, a couple came to me the other day and told me that their home was in foreclosure but that they were “determined” to keep it no matter what happens. But look at the facts: They are 5 months behind on their mortgage payments and property taxes. They need about $25,000 just to get current. Their mortgage payments alone every month are $4,200. Their total net income is about $6,000 monthly. They have 2 car payments and have credit card debts of about $60,000. Their house has no equity. When I asked them how they were able to make their mortgage payments in the past when they also had all these other huge monthly expenses, they said that the only reason they were able to pay in the past was by using their credit cards!!! And after the credit cards got maxed out, they simply started falling behind on their mortgage payments. OK, now you don’t have to be an attorney to know just by looking at the facts that this couple could not afford to keep this house from the time they bought it if they had to rely on using credit cards just to be able to make the payments! Does this make any sense?
Now, don’t get me wrong. Of course, every situation is different. There are cases where saving the home is not only possible but is advisable. Factors to consider are income, availability of options (bankruptcy and non-bankruptcy alternatives), equity in the property and how everything fits in your total financial picture and future goals. My suggestion is to keep an open mind and to consider all possibilities. Being closed-minded creates shortsightedness or an inability to have a vision for the future. If you are in foreclosure, you are no doubt faced with some serious decisions that you have to make.
Is your home an asset you or simply a huge liability that you are better off without? How can you wipe the slate clean and start over? Is filing bankruptcy necessary or can it be avoided? Are non-bankruptcy options such as a loan modification, a forbearance, a repayment plan, or a short sale possible? If you don’t know the answers, you may feel very frustrated at the moment. But frustration can be a good thing if it propels you to take the needed action to do something about your situation. As a first step, I suggest you consult with an attorney who can advise you regarding your rights and help you implement a plan that works for you. Remember that in foreclosure, time is of the essence and every day you waste without taking action only makes your situation worse.
For a free consultation, call Toll-Free 1-866-477-7772. Let us evaluate your situation and recommend possible options. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped more than 4,000 clients in finding solutions to their debt problems. To schedule a free attorney consultation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772).
(Published in LA Midweek March 4, 2009, p.B2)
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