Home Underwater?

Whether Your Home is Under Water in San Bernardino, Los Angeles, Orange or Riverside Counties,Bankruptcy May Provide the Right Solution for You.

Is your home underwater? “Underwater” is a term that refers to when the mortgage on a home exceeds the fair market value of the home. Sometimes being underwater is also referred to as being upside down on your mortgage or having negative equity. No matter what you call it, owing more on your home than you could sell it for is never a good thing. However, what you should do if you are in this situation depends on several factors. Your best option may be to do nothing at all.

Being “underwater” may not affect you if you are not planning on selling your home any time soon and can easily afford the monthly mortgage payments along with your other expenses. In this situation you may be best just to carry on and see what happens with the market. It could be that in a few years the housing market in your area rebounds and your home increases in value.

In other cases, doing nothing it not an option. For example, if you need to move or are unable to make your monthly mortgage payments, being underwater can be an immediate problem that needs action now. In this situation, bankruptcy may provide a solution. However, bankruptcy is not a perfect fix all. For example, a bankruptcy cannot resolve the discrepancy between the value of your home and the amount of the mortgage. The bankruptcy court has no power to force the bank to modify your existing mortgage so that it conforms to the actual market value. Instead, what a bankruptcy can do in certain situations, includes:

  • Halt foreclosure proceedings: If you have fallen behind on your monthly mortgage payments and the bank has begun foreclosure proceedings, the filing of the bankruptcy can temporarily halt the foreclosure. Stopping the foreclosure can give a home owner time to pursue a loan modification or other programs to save their home, regardless if the home is underwater or not.

  • Strip secondary mortgages on the property: One unique power of the bankruptcy court is the power to strip secondary mortgages on a property. If a home is encumbered by a second or home equity line of credit (HELOC), the bankruptcy court can strip these mortgages from the property if the amount of the first mortgage exceeds the fair market value of the home. In some cases this can mean the difference between the homeowner being able to stay in the property and having to walk away from the home.

  • Avoid a foreclosure deficiency judgment: In some cases the only real option is for a homeowner to walk away from the home (and the mortgage too of course). But walking away is not always as simple and pain free as it sounds. In some cases the lender can pursue what is known as a deficiency judgment against the homeowner. The filing of a bankruptcy can avoid this potentially costly situation for a cash-strapped homeowner.

If you are in the situation where your mortgage far exceeds the fair market value of your home, the good news is that you have options. To find out how filing for bankruptcy can help you stay in your home or walk away without any additional debt, you need to speak with an experienced Southern California Bankruptcy Attorney right away. Attorney Jane Cervantes has helped numerous clients escape their mortgage woes by filing for Chapter 7 or 13 bankruptcy. To schedule a free consultation with Ms. Cervantes call The Law Offices of Jane Cervantes today at (909) 626-3595. The office is conveniently located in the Village of Claremont and serves clients in Los Angeles, Orange, Riverside and San Bernardino counties.