Change the Swing of the Pendulum, Understand Your Options!

Many Americans are facing a challenge with their home. Some are not able to afford the mortgage because of job loss, reduction of pay, or increase in monthly fees.  Others are able to afford the mortgage but are not interested in keeping the home because it is no longer a good investment.  What are their options?

You have the option of selling your home.  There are two types of sells, traditional or short sale.

• Traditional Sale: A traditional or equity sale means exactly what it says; a buyer and seller agree to buy/sell a property for a specific price. Upon the completion of the sale, the lender’s loan has been satisfied.

• Short Sale: A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the amount owed on the property, and the property owner cannot afford to repay the full amount of the mortgage. Whereby the Mortgage Company agrees to release their lien on the real estate and accept less than the amount owed on the debt.
  

You have the option of foreclosure.  There are two types of foreclosure: deed-in-lieu and traditional foreclosure.

• Deed-in-Lieu: A deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.  Basically, the homeowner gives back the property.

• Foreclosure: Foreclosure is a specific legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the home by court order. 

Finally, you have the option of bankruptcy.  An individual has an option of chapter 7 or chapter 13.

• Chapter 7 bankruptcy is also known as straight bankruptcy and it is the most common form of bankruptcy in the United States. Chapter 7 differs from other forms of bankruptcy because, unlike chapter 11 or chapter 13 bankruptcy, your debts are not reorganized. Instead, when you file chapter 7 bankruptcy certain assets are liquidated, or turned into cash, and divided among your creditors, and then any of your remaining debts are discharged, or canceled.

• Chapter 13 bankruptcy is referred to as wage earners bankruptcy. It is an excellent alternative to chapter 7 bankruptcy for individuals who have a steady income but are still facing high debts, such as mortgage debt. Under chapter 13 bankruptcy, an individual works with the bankruptcy court to create a plan to pay off most or all of the person’s debts within a 3 to 5 year period.
  

If you are facing a challenge with your home and need to know which option is best for you, contact my office to schedule some time to discuss.

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