Whether you’ve already bought a new home, or are in the process, it is very likely that you won’t be able to make the full payment, outright. For this reason, there exists mortgage plans and companies.
Owning your home, and paying off the mortgage, might seem like an economical option. Indeed, it is, since a mortgage is considered good debt. This is because, after paying off the mortgage, your home would still have value, and most likely it would be highly appreciated.
However, there could be situations when you might be under debt. And overwhelmingly, think of filing for bankruptcy, or if you need to, possibly, sell your home short.
So, how do you proceed with it?
Know the purpose of the short sale
It is quite important to understand what a short sale means? In simple terms, a short sale happens when a homeowner tries to sell a property for a value less than what they owe to the mortgage company. Notably, both the lender and the borrower need to mutually accept the lowered selling price as the full payment towards the debt.
Short sales can help you in many ways. For instance, it can help you get rid of the debts that you cannot pay. And consequently, sustain a good credit score.
On the other hand, a short sale also forfeits your ownership rights to the property. That means you would no longer hold possession of your home. However, in some cases, you might be allowed to repurchase the property, after a certain time.
If all fails, and you couldn’t sell your home short, the option that you’re left with is filing for bankruptcy. And most likely you’d need to get help from a bankruptcy lawyer, for they only know best how to handle such legal matters. But, the remaining question is, if you are to file for bankruptcy, how do you do it?
How to file for bankruptcy?
Even if you are trying to sell your home short, there are possibilities that you might not be able to sell it in time. In such instances, seeking to file for bankruptcy might be the way forward, as already mentioned.
However, there are further two options you have, when filing for bankruptcy.
Chapter 7 Bankruptcy
When you simply handover the keys to your home, back to the lender, or the bank, it is known as foreclosure. The lender would then be responsible for selling your home further to recover any outstanding debt.
Notably, foreclosure under chapter 7 bankruptcy also rids you of any liabilities for the remaining dues, along with the taxes that are due.
Chapter 13 Bankruptcy
While chapter 7 bankruptcy is quite straightforward, chapter 13 isn’t. Under chapter 13 bankruptcy, although you pay the bank with the money you receive from a short sale, you are still liable for paying the outstanding dues.
Notably, this only happens when there are several properties in a locality that are underwater, and banks might not be able to recover the dues in time. In such a case, the bank or the lender also has the right to sue for not paying your dues.
As it may seem, short sales are better than filing for bankruptcy, as they help protect your credit score. However, it is still best to have consulted with your lawyer before moving forward. They might help you better and save you unnecessary