A little advice from a Bankruptcy Attorney in Manhattan with hundreds of clients who have gone through this: Get the hell out of your home if it’s underwater(worth less than the mortgage you owe) and move on. Tough love, yes, but realistically the only solution out there if your mortgage is underwater in New York.
A new article discusses how banks are becoming even more aggressive in their foreclosure procedures. They’re kicking people out on the street in shorter periods of time. What does that mean to you?
The emotional attachment to a home is something that simply cannot be understated. I’ve had plenty of people begin to cry while sitting in my office when the prospect of leaving their home came up. I get it. My parents owned their co-op for 30 years. The memories I had there were some of the best memories I can remember. But then there is the inevitable problem or trying to pay a mortgage that is more than the actual home is (and may ever be) worth. In a situation like that, which happens all the time these days, the best thing you can do is file Bankruptcy and surrender the home. I know you’re looking for an out other than that, but realistically there almost never is one. Here are your options:
1. Continue paying the mortgage; Hope you win Jeopardy soon:
You take this approach about six months prior to calling me. You will do anything possible not to admit that you need to walk away from the home. You’ll slave and scrimp and do anything to make sure the mortgage (sometimes two mortgages) is paid, even partially, each month. If you fall a few months behind, you figure you’ll catch up and pay when you can. You cut down on almost anything (and I’ve seen it all) just to make that payment. Next month will be different. Next month you think you’ll have enough. But inevitable you don’t because of the economic situation we’re all in. So you call me. 6 months later than you should have. 6 months worth of saving money that you likely could have kept. You feel great after the Bankruptcy and the monkey comes off your shoulders, and you can finally sleep.
2. Stop Paying the Mortgage but do not file Bankruptcy.
Let me guess; the Bank told you that you can apply for a loan modification. Let me guess; they told you to stop paying the mortgage for a few months. You listened. Stop the insanity. The Loan Modification process, in my opinion, is one the dumbest, most irrational, most arbitrary process’ that I’ve ever seen. Literally, communists in government offices would look at it and go “This is just too inefficient.” It’s crazy, makes no sense, and has very little chance of succeeding. It’s almost always a waste. And it puts you in the hole. Your credit score drops, and you’re waiting for months and months and sometimes years and years for some solution and meanwhile your credit score goes down the tubes. You don’t even know, if you do get approved, if you’re going to be able to afford the new payment. And forget it if you have a second loan. Twice the insanity. Again, total waste of time. You’re waiting years for something that may not happen and may not help you. File Bankruptcy, have your credit generically repair itself (quickly) and move on. You can, if you want, even chose to keep the home once you file Bankruptcy. I do not recommend this if you’re home is worth less than what you owe.
3. Think the Bank wont go after you after a Foreclosure because your friend/neighbor/Priest/bodega owner told you they wont.
They will. End of Story. If they don’t, they’ll sell it to a credit collection agency that will. They have up to six years to sue you. Then another twenty or so to collect. Want that phone call 10 years from now? That frozen bank account? Deal with the issue now, before it’s too late.
Emotion is HUGE in this, but understand that there are literally millions of people dealing with the exact same issues right now. Ask the people who have filed Bankruptcy and gotten rid of these debts, and ask the people that haven’t. I’m pretty sure I know which side feels better about their financial life going forward. We’re here, as always, in our Manhattan or Brooklyn office, to answer any questions you may have.
