What to Do If You Owe More On Your House Than It’s Worth: Part II – Bankruptcy Options

Learn what to do if you owe more on your house than what it's worth.

This is the third part in the series: What to do if you owe more on your house than it’s worth. The burden of owing more on your house that it’s worth is huge. There are a few options you can consider to move on from a bad investment. In previous articles, we discussed trying for a loan modification, selling your house in a short sale, and a deed in lieu of foreclosure. Here are a two more options towards financial freedom:

Chapter 13 Bankruptcy in Centennial, Littleton and Aurora

Filing for Chapter 13 bankruptcy can be a good option which in some cases, allows you to keep your home, and significantly reduce the amount that you owe on it. Some of the benefits of filing Chapter 13 are:

  • Filing will stop foreclosure, even if you’re close to the sale date.
  • Chapter 13 allows you to catch up on payments that you have missed over a period of 3 to 5 years.
  • You might qualify for a Lien Strip. If your home is worth less than the first mortgage, other financial burdens like a line of equity, or a second mortgage can be stripped – meaning that you won’t be responsible to pay them.

Bankruptcy can be time-consuming. But, the court protects you, and makes it a much easier process than the other options we have mentioned.

Chapter 7 Bankruptcy in Centennial, Littleton and Aurora

Filing for Chapter 7 bankruptcy is a way to get a fresh start on life. It provides a discharge of your debt in just a few months, and doesn’t require repayment like filing for Chapter 13. The benefits of a Chapter 7:

  • You will be able to walk away from most of your debt, and your home without the fear of being sued.
  • You may be able to keep your home – you won’t be burdened by huge credit card bills, so you’ll be able to pay your mortgage. Or, you might be able to get some leverage with the bank as you negotiate for a loan modification.

Who should file for a Chapter 7 bankruptcy in Arapahoe County or Jefferson County? Chapter 7 is for people who have a large amount of debt as well as a mortgage.  Filing Chapter 7 has the biggest negative impact on your credit score than any of the other options, but it gives you the most benefit as well. It provides the quickest path back to financial freedom and future home ownership.

Things to Consider When You Owe More One Your House Than It’s Worth, and Are Considering Bankruptcy:

  • Each of these options may have tax repercussions – if a debt is forgiven (this doesn’t include debt that is discharged in bankruptcy) this may result in a liability at the end of the year, and be treated as income tax purposes.
  • No matter which option you choose to be free of a home which is worth less than you owe, it is important that you have an experienced bankruptcy attorney as an advocate during the process. Lenders aren’t going to forgive your debt without a fight. Having an expert on your side that can help you avoid debt collectors and lawsuits in the future is important.

We hope we have answered your question about what to do if you owe more on your house than it’s worth. Having an experienced bankruptcy lawyer by your side as an advocate with a lender is important for your financial future, and to avoid future lawsuit. Contact Centennial, Littleton and Aurora bankruptcy attorney Barry Arrington at 303-205-7870, or submit the “Get Help Now” form, and he will fight to give you the best, fresh start possible.

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