Get advice from your California bankruptcy attorney both to successfully save your home and to save money, often lots of money.
1. Strip second mortgage and other junior mortgages: Hanging onto your home would be much easier if you could pay less on your monthly mortgage payments. That may be possible if you have a second mortgage or any kind of mortgage on top of your primary one. Through the Chapter 13 “adjustment of debts” you may be able to “strip” such a junior mortgage from the title of your home. This can likely happen if your home is worth no more than the first mortgage (plus any property taxes or other “senior” liens). Then the “stripped” mortgage is paid nothing or very little before it is forever written off at the end of your Chapter 13 case.
2. Strip judgment liens: If you’ve ever been sued by a creditor, that creditor probably has a judgment against you, which is likely now a lien against your home. Either a Chapter 7 or Chapter 13 bankruptcy can often wipe out both such a judgment lien and the debt underlying it.
3. Avoid a foreclosure by getting years to cure the mortgage arrearage: Filing bankruptcy stops a foreclosure. If you are not too far behind, and if writing off your other debts will enable you to catch up on your back house payments within a matter of several months, a “straight” Chapter 7 would likely enable you to do that. If you are further behind than that, Chapter 13 could give you as much as five years to catch up, while protecting you from foreclosure throughout that time.
4. Buy time to sell home at a better price: If you have decided to sell your home, do so not in a pressured distress sale but rather on your own schedule. The extra months provided by Chapter 7 could get you the extra market exposure for a higher price. The potential extra few years provided by Chapter 13 case may also give time for the market price to increase, and/or reach the point in your family’s life when it’s time to move.
5. Afford your home by reducing or eliminating the rest of your debt: When you see an attorney who deals with these kinds of issues day in and day out, you will find out which of your debts can be discharged (legally written off) and which can’t. You will also find out what it would cost you monthly to keep your home within various possible options for doing so.
6. Overcome your income tax debt: If you have owed back income taxes for a while, a tax lien may have been recorded against your home by either the IRS or the California Franchise Tax Board. Depending on the circumstances-especially what tax year the underlying income tax is from, and how much equity you have in your home-either a Chapter 7 or Chapter 13 bankruptcy may be able to either discharge that tax debt or pay it off slowly while you and your home is protected from the tax collector.
7. Satisfy a debt to an ex-spouse: Certain limited debts from a divorce can be discharged in bankruptcy, and those which can’t-such as child and spousal support-can nevertheless often be handled infinitely more advantageously. For example, if you fell behind on support payments, likely resulting in a lien against you home, Chapter 13 would give you time-up to 5 years-to catch up on the back support while your home is protected from your ex-spouse or the local support enforcement agency.
8. Catch up on property taxes, homeowners’ association dues and assessments: Chapter 13 in particular gives you time to catch up on property taxes, satisfying your mortgage holder at the same time, because you are likely in violation of your mortgage contract if you have fallen behind on these taxes. Homeowners’ associations also have strong rights against you and your home, but bankruptcy can give you a leg up on taming yours.
9. Improve likelihood of successful mortgage modification application: A bankruptcy filing can help you get a mortgage modification approved because reducing your debts means that you can more reliably make your modified mortgage payments.
10. Get critical legal advice: You’re in a Catch-22: you know that you really need to find out your legal options for dealing with your home and your overall financial life, but you don’t know who to turn to and can’t afford to see an attorney. So it feels like you’re flying blind. You would love to get solid, practical advice about your options. Call me to set up a free initial consultation to that advice.
Why do I do this for free? For two reasons: 1) I can help many of the people who come in for my advice, and enough people end up hiring me so that it’s worth it to me. 2) I need to help you out of this Catch-22 of not being able to afford the advice that you really need. Let’s be very clear-legally and ethically I cannot make you do anything, such as file bankruptcy, and you will be totally free to hire me or not after our initial meeting. But after that meeting you will know your options and be able to make informed decisions about your home and about your financial life.