Using Bankruptcy To Walk Away From A Home
For many, walking away from a home loan is the right decision. The recent economic downturn has left many homeowners owing substantially more than their home is worth and it may take many years of payments simply to break even. In other cases homeowners have suffered a job loss, a reduction in pay, or other financial change that makes their present home unaffordable.
The down-side to walking away from a home is that the debt still remains. The mortgage company will take your home through foreclosure and sell it, sometimes at a steep discount, and you will be liable for the deficiency balance. The mortgage company may try to collect or it may assign your debt to a collection company. Harassing phone calls, threatening letters, and finally a lawsuit are inevitable. Often the lawsuit is filed years later and just before the statute of limitations expires. By then you may have rebuilt your credit and be in a much better financial situation. The effect of this lawsuit can be devastating.
Bankruptcy law can help you walk away and discharge your obligation to pay any balance on a home loan once and for all. The instant you file bankruptcy you are under the protection of the United States Bankruptcy Court and creditors are prohibited from taking any collection action against you. The bankruptcy filing immediately stops any foreclosure or repossession action, and any lawsuit. This protection, called the automatic stay, extends through the duration of your bankruptcy case. A creditor must seek permission from the bankruptcy court in order to start or continue the foreclosure process while you are under bankruptcy protection. The filing of a bankruptcy case generally forestalls the foreclosure process for months and gives you the opportunity to walk away on your own terms.
At the conclusion of your bankruptcy case you will receive an order of discharge from the bankruptcy judge. This order permanently prohibits all discharge creditors from taking collection action against you. However, once the bankruptcy case is closed, the mortgage company can commence foreclosure proceedings to take possession of your home, but cannot collect money from you personally.
If you are considering walking away from your home, speak with an experienced bankruptcy attorney and learn how bankruptcy can help mitigate your financial exposure. An experience bankruptcy attorney can explain your options and help you decide on a path that makes the most financial sense for your family.