House and Bankruptcy

Your house and bankruptcy covers a lot of issues.

House and Bankruptcy
Ice House

A new client has one scenario:  has a house that is

underwater (not ice yet, like the picture displayed)

being worth less than what is owed on that house.

So, they rent a different house for their residence.

But, those tenants are not paying their rent.  Even if they do, in these situations, the rent does not cover all the cost of mortgages, water bills, taxes, insurance, maintenance

Can Bankruptcy Help With House Debt?

Good news, the answer is yes.

These folks can file bankruptcy and discharge their obligation to pay the mortgage debt on the house they are renting.  They can keep renting where they do live.  And the debt on the house they own will be discharged in a Chapter 7 bankruptcy.

 

But, filing that bankruptcy will NOT take ownership of the house out of their name.  And the mortgage liens on that house survive bankruptcy.

So they may still be stuck with city ordinance violations if the grass is cut, and so on.

You cannot force the mortgage company to take the house back from you.

And, you cannot sell a house without the mortgage company releasing their lien, their mortgage.

Which is not easy to do when the house is worth less than what you owe in mortgage liens.

Housing Debt for Retirees

Even after the real estate bust and Great Recession, the mortgage companies throw money out there for home loans.

Much of that debt Americans are taking with them into retirement is housing debt, Prudential noted Tuesday in a white paper based on data from the Center for Retirement Research at Boston College. Citing Federal Reserve data, Prudential reported that median-home values for those aged 65 to 74 rose 76%, while housing debt skyrocketed 393%.

This is one of the several enormous changes in our culture and economy.

In days of old, people retired living in paid for homes, and their children could inherit something.

Now, the generation of kids is burdened with hundreds of millions of student loan debt.  Much of which was co-signed, or even borrowed, by parents or grandparents.

And they will not be inheriting home equity from their parents.

Reverse mortgages exacerbate this problem.

Now, you can file bankruptcy and keep the house you live in.  Depending.

Depending on how much your house is worth, and how much you owe on it, and, if you can afford the payments.

You cannot force the mortgage company to lower the monthly payment.  In or out of bankruptcy, you have to make the mortgage payment to keep a house.

And, as with the rental house discussed above, you cannot force the mortgage company to take the house out of your name, even if you stop paying, and move out.

As always, contact me for a free consultation about these issues.

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