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If You Can't Afford Your Home, Is Foreclosure Right for Your Family?

I was reading an article recently that predicted that there are so many families that cannot make their house payments that the foreclosure back log will last at least 3 years. In McLennan County, there were over 80 homes scheduled to be sold at a foreclosure sale in the month of November alone. In my Waco bankruptcy law office, I see many individuals who are behind on their home loans. I try to work with them to find the best solution for their family. While I have helped families in Waco and the surrounding areas save their homes through bankruptcy or loan modifications like the Home Affordable Modification Program (HAMP), other families have come to the difficult decision that they can rent cheaper than trying to continue to save their homes. If you can't afford your house payments or the hidden costs of owning a home, foreclosure may be the best option for you. Families across the nation are coming to the same decision about their homes.

Deciding to let your home go to foreclosure does have consequences. For example, let's say you owe 100k on your mortgage. It is doubtful the mortgage company will be able to sell your home at a foreclosure sale for 100k. Suppose the home is sold at a foreclosure sale for 25k. Then there is a deficiency of 75k that you may owe depending on your type of mortgage loan. You mortgage company could try to sue you for that deficiency. Furthermore, you may have tax consequences from the deficiency in the form of a 1099-A. If you receive a 1099-A, you need to consult with a CPA to discuss your options. In addition, the foreclosure will show up on your credit report.

I typically advise my Central Texas clients that if they are choosing to let their home go to foreclosure, they may want to file a bankruptcy along with the foreclosure. By filing bankruptcy, they are ensuring that they are not liable for any deficiencies or tax liabilities to the IRS. Basically, they are letting their home go to foreclosure knowing that they will not owe any more money on it. It is about peace of mind.

Furthermore, the bankruptcy and foreclosure teamed together may help you purchase another home in a few years after the bankruptcy. I have worked with real estate agents who refer their clients for bankruptcies so they can clean up their credit and buy a home a few years after the bankruptcy. This strategy does not work for all clients, but I have seen it successfully help someone buy a home on more than one occasion.

The bottom line is that letting your home go to foreclosure is not the right decision for every family. However, it might be the right decision for your family. You need an experienced attorney on your side who has dealt with foreclosures. At the Kehl Law Firm, we will listen to you and help you find a solution for your individual circumstances. Call 254-633-2876 or email us at [email protected] TODAY for a FREE, no-obligation consultation to explore your options. If you are behind on your house payments, time is of the essence! Call today.

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