No, not flooded by real water, like the ice in the picture.
Home value exceeded by mortgage debt,
that kind of underwater.
The economy is bouncing back, right?
Housing market on the rebound, right?
Its in all the papers.
However, we still have over TEN MILLION homes worth less than what is owed on them.
Can Bankruptcy Help?
I hate to sound like a lawyer, but, maybe.
If your house has one mortgage, and you owe, say 150,000, and your house is worth 100,000, bankruptcy is not much good.
That is because bankruptcy law allows modification of mortgages, EXCEPT the first mortgage on your principal residence.
Now, that change to the bankruptcy code passed the House in 2009, but, failed in the Senate.
I was there on NACBA‘s lobby day, when the counsel for a House committee, when asked what we could do to put the bill over the top, said it needed a push from the White House.
Which never came, contrary to then Treasury Secretary Geithner’s newly released memoirs.
He, and the rest of the government, helped the big banks, and not the homeowners.
I used to rant on this every week. Not so much anymore, but that S.O.B. is out with a book trying to make himself look good, and he is just part of the political class that screwed us over.
OK, back to solutions.
What If I Have Two Mortgages?
This is where Chapter 13 bankruptcy can really do some good.
So, your home is worth 100,000, and you owe 125,000 on the first mortgage, and 50,000 on the second.
In a Chapter 13 payment plan bankruptcy, you can do what we call lien stripping, get rid of that second mortgage.
Not just the debt, but the lien on your home.
This ONLY works if the value of the home is less than what is owed on the first mortgage.
You still have to comply with the rest of Chapter 13 bankruptcy requirements.
Unfortunately, you cannot do this in a Chapter 7 bankruptcy in most jurisdictions, including Michigan.
Talk to an expert, like me.