Michigan Bankruptcy Mortgage Options (Part Two)

This is the conclusion of a two part series, part one on bankruptcy mortgage options can be found here.

Now, you cannot force the mortgage company to foreclose, or take your house back.

They might agree to a short sale, but, as with a modification, you cannot force it on them.

They might accept a deed in lieu of foreclosure, in lieu is French for instead of, because it saves them a lot of time and money versus the foreclosure process, but, again, you cannot force it on them.

If you do this, make sure the paperwork states the mortgage balance equals the value of the home.

And if you have a second mortgage, forget about a deed in lieu, and they will also have to sign off on a short sale.

If they foreclose on your mortgage, great, save your money for the next house.

But, first, get your monthly budget together, and consult a bankruptcy attorney.

For a second mortgage to foreclose, they have to pay off the first. Ain’t gonna happen.

If the first mortgage holder forecloses, you still owe the balance on the second, and whatever other debts you have.

In Michigan, if the first mortgage forecloses by publication, there is an auction, and if they bid what you owe them, after the 6 month redemption period, they get the house, and you owe them nothing.

So if you can handle your other debts, and have no second mortgage, no need for a bankruptcy, at least until the foreclosure sale.

FORECLOSURE SALE PRICE

You will have to check the sale price after the auction, nobody tells you. Your county sheriff runs the sale, so their office will have a record of the sale price.

It you owe $200,000, and they bid $100,000, and that is a commercially reasonable price, you still owe the difference even after they take your house.

It does not matter what they get when they sell the house later. Your potential liability is fixed by the foreclosure sale auction price.

My advice, as always, get the facts.

What can you sell your house for, right now, as is, no painting or fix-up?

How much do you owe?

What is your realistic monthly budget, income and living expenses?

Assume home values will continue to go down, that the cost of other living expenses, food, fuel, et cetera, will go up, and, your income, will stay the same or go down.

Can you afford to stay in your house?

Does it make economic sense to do so?

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