Should I consider personal bankruptcy if my home is under water? 13 Answers as of May 25, 2011

I am underwater with a deed of trust in my name only. The principal residence is in my name (a trust in my name) also. The underwater amount is over $500K thanks to the declining real estate market. I have applied for a modification but cannot get any response from the servicing agents of Chase. My question is should I consider a personal bankruptcy, rather than just walking away from the house, can we KEEP the house with a lower deed of trust or mortgage, etc?

Ask a Local Attorney. 100% Anonymous. Free Answers.

Free Case Evaluation by a Local Lawyer: Click here
Robert Peters, P.A.
Robert Peters, P.A. | Robert L. Peters
First, Florida is not a Deed of trust state it is a mortgage state, so I am wondering if you are in Fl or if the property is even in Fl. In any event, a chapter 7 or a 13 can be your salvation in you can "surrender" secured property (like your house) and the loan balance "discharged". A Chapter 7or 13 can also eliminate a "deficiency" from the sale of a secured asset.
Answer Applies to: Florida
Replied: 5/25/2011
Law Office of L. Paul Zahn
Law Office of L. Paul Zahn | Paul Zahn
The main benefit you would receive from bankruptcy would be protection against a deficiency judgment. If you have no other debt, you must ask yourself if filing for protection and discharging that debt is worth the hit to your credit. As for keeping the home, I don't recommend filing for bankruptcy if your sole desire is to modify the loan, as the lender doesn't have to modify the loan just because you are in bankruptcy. If you are in my area, please contact me for a free consultation to see if bankruptcy is right for you.
Answer Applies to: California
Replied: 5/24/2011
Law Offices of Joseph A. Mannis
Law Offices of Joseph A. Mannis | Todd Mannis
So many other variables, its difficult to answer with the limited info you have provided. Is there other debt besides the mortgages? Credit cards? Medical bills? With regard to the house, is there a second mortgage as well, or just the first? Do you live in a state where they can pursue you for deficiencies on the mortgages? You should talk to a bankruptcy attorney so that you and he/she can go over ALL the facts in your case and come up with a sound strategy.
Answer Applies to: California
Replied: 5/24/2011
Law Offices of Michael T. Krueger
Law Offices of Michael T. Krueger | Michael Krueger
Walking away from your home is the worst thing you can possibly do if you intend to purchase a home in the future. You cannot modify your loan through the bankruptcy process. However, you can still apply for a loan modification during bankruptcy so long as the trustee is aware of any changes to your monthly payments. A chapter 13 bankruptcy will allow you to place the home arrears in a payment plan making it possible to payback what you are late on over a period of time. If you walk away from you home and you refinanced, you will most likely receive a 1099 for debt forgiven for the amount you refinanced over the original purchase price minus the sale price in the foreclosure. This means that if your original loan amount was $200k and you refinanced for $400k and the home sells for $200k you will receive a tax liability for the $200k amount. If you surrender your property through bankruptcy you will be exempt from this tax liability.
Answer Applies to: California
Replied: 5/24/2011
The Law Office of Mark J. Markus
The Law Office of Mark J. Markus | Mark Markus
Whether or not it is beneficial to file bankruptcy or not can only be determined after a comprehensive consultation with a bankruptcy attorney. There are too many factors to consider to deal with in this kind of forum.
Answer Applies to: California
Replied: 5/24/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    When you file bankruptcy you are no longer personally responsible for the real estate debts. However, the lender retains its security interest in the property. In other words, if you give up the property you owe nothing. If you plan to keep the property you must pay what is owed on the normal payments. Of course, you can try to get a modification agreement from the lender before, during or after bankruptcy. Usually lenders will not reduce the principle amount owed on your loan.
    Answer Applies to: California
    Replied: 5/24/2011
    Saedi Law Group
    Saedi Law Group | Lorena Saedi
    The answer to that question depends on what state you live in. If you live in a state that usually does not pursue deficiency judgments then you may not need to file bankruptcy. In Georgia our courts do not typically issue deficiency judgments. If you have a first mortgage and the property forecloses the mortgage company simply takes the property back. Because there are so many different moving parts in a potential bankruptcy I would suggest that you meet with an experienced bankruptcy attorney in your area who can review your entire financial picture and provide the best options.
    Answer Applies to: Georgia
    Replied: 5/24/2011
    Greifendorff Law Offices, PC
    Greifendorff Law Offices, PC | Christine Wilton
    If the mortgage is your only debt concerns, then bankruptcy may not be right for you. Instead, you should look into a short sale. We can refer you to a reliable authority, if you're interested. If you have other debts, or perhaps a second mortgage, etc. then you may want to consider bankruptcy. We offer free consultations.
    Answer Applies to: California
    Replied: 5/24/2011
    Law Office of Harry L Styron
    Law Office of Harry L Styron | Harry L Styron
    The first deed of trust on a personal residence may not be modified by a bankruptcy court. If there is a second which is entirely under water, then it can be discharged. The issue is more, can you afford the payments, rather than, should you walk away because the deed is underwater? You have to balance the impact of the rental market becoming more expensive, the impact on your credit of filing bankruptcy, and whether or not you believe that the combination of demand and inflation in the future will increase the nominal dollar value of the house to the point where you again have equity. But either walking away or filing bankruptcy will have an immediate impact on your credit, your ability to finance another home, and even whether landlords will choose to rent to you.
    Answer Applies to: California
    Replied: 5/24/2011
    The Northwest Debt Relief Law Firm
    The Northwest Debt Relief Law Firm | Thomas A McAvity
    There is no guarantee at all that a bankruptcy will enable you to modify your mortgage, but your lender may become more amenable to modifying it once the lender realizes that you are going to surrender the home if you do not get one. If nothing else is working, it may be well worth a shot. I would consult with a local bankruptcy attorney immediately.
    Answer Applies to: Oregon
    Replied: 5/24/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Filing bankruptcy will do nothing to modify your first mortgage. I do not know which state you live in. You may have to file bankruptcy to be fee of the first mortgage when you do leave. The rules are different in every state on this, so you should seek counsel in the state where you reside.
    Answer Applies to: California
    Replied: 5/24/2011
Click to View More Answers: