With people struggling to get through each day in this economy, many Floridians are facing some hard choices. Between paying the mortgage or car payments and putting food on the table each month, they can begin to feel buried under an impossible debt with no way out. It may seem easier to just throw in the towel and let the house go into foreclosure.
Fortunately, there are several options for obtaining debt relief or debt management, depending on the unique situation of each individual. Getting legal advice from an experienced bankruptcy lawyer in the Miami area is the first step toward discovering the best way to regain control of your life.
Is it better to go into foreclosure?
Some people may decide if they cannot make the payments on the home and have discovered that they actually have negative equity, it is better to just walk away from their underwater mortgage. When this happens, some people choose to just stop making payments, or do a short sale.
If the home goes into what is called a “strategic foreclosure”, some states, including Florida, allow the bank to go after the borrower to seek a deficiency judgement if the foreclosure sale is less that the debt owed. Not only that, the foreclosure will remain on the consumer’s credit score for years later, making it much more difficult to obtain a loan.
Another option is a short sale, in which the borrower can ask the lender for approval to sell the home for less than market value. A deed-in-lieu is also possible. In this case, the borrower signs the deed over to the lender instead of foreclosing. However, in either instance, the borrower may also face a deficiency judgement later on.
Are there other options so I can keep the home?
There are several ways of keeping the home even if you are unable to make payments:
- Ask the lender for a principal reduction. Even if this is not an ideal situation for the bank, it is preferable to having the house go into foreclosure.
- Work out a loan modification. With a skilled bankruptcy attorney to negotiate, it is possible to work with the lender to lower the payment amounts, especially if you can demonstrate financial hardship.
- Refinance the home. This is only possible if the home already has equity built up.
Chapter 7 or 13 bankruptcy are also options that many Floridians are considering, especially given the state’s generous homestead protection for debtors. Of course, there are conditions in order to determine which type of bankruptcy is best for you.