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mortgage modification, bankruptcy, underwater, deliquent on mortgage, hampton, vaBy John G. Merna

Many people across the country whether due to loss of income, divorce, increased expense, etc., wake up one day to find they can’t afford their mortgage.  What can a homeowner do?

You don’t want to lose your house by selling it or having it foreclosed.  What do you do?

First step is you have to run an honest assessment of your situation.  Mortgage miracles do not happen despite rumors of incredible reductions in the mortgage payment amount.  Most are only rumors.

First Question:

Is your house upside down or underwater?  What this means is that the value of your house is less than the amount owed on your mortgages.  You need to do a quick calculation to figure out how big your problem is.  Subtract the amount owed on all mortgages and liens from the value of the house.  If the number is negative, you are underwater.  The greater the negative equity, the bigger your problem.

Next you can estimate how long it will take to recover your negative equity by estimated the average amount of appreciation over the next few years.  If you estimate the properties in your area are appreciating at a rate of 3 percent and your house is worth $100,000, you are gaining value at a rate of $3,000 per year.  So if you are $24,000 underwater it will take you around 7 to 8 years just to break even.  If you goal is to pay off the loan and live in the house forever then negative equity is less important than how good the terms are on your mortgage loan.

No matter what the outcome of your analysis is, if you are underwater you are not alone.  About 1 in 10 American homeowners is in the same boat.

Do You Have A Second Mortgage?

If you have a second mortgage you may be able to eliminate or strip the mortgage in a Chapter 13 bankruptcy.  To strip a second or third mortgage or equity line the house value must be equal to or less than the value of your first mortgage or all junior mortgages.  Wiping out a second mortgage is very possible and something we at Merna Law do every day.  This would eliminate the payment on the second mortgage making the house more affordable.

Second Question:

You also have to ask yourself can you afford any reasonable mortgage?  If your income has plummeted through the floor there may not be any modified you can afford.  Be aware that the reality of what a mortgage payment can be modified to is not magic.  It is based on what is owed, the interest rate charged, and the repayment term.  Online calculators are available to allow you to play with the possibilities.

Reset Your Mindset – I often running into clients that have an unreasonable attachment to their homes.  Wives that are willing to work themselves and their husband to death for a money pit they can barely afford because it is their “home”.  Husband’s too proud to understand when a house or a mortgage is a bad financial decision.  A building is a building.  When we give it too much power or value in our minds we lose perspective and the ability to make a good financial decision regarding the building.

I find all to often I am telling my clients that “sometimes you have to take a step back to move forward”.  If you are hopelessly upside down on a house and in a poor mortgage you should consider the value of taking a step back.

Don’t get me wrong.  It is okay to own a house that has declined in value if you are not planning to move for a long time.

Do you really need a bankruptcy attorney?

The answer to this is clear.  Are you behind or struggling with your mortgage? Do you have anxiety attacks when you think about trying to selling your house?  Have you been experiencing a suffocating feeling when you come home each day and thing about the things that need to be done on your house?

A free consultation with one of our attorneys can give you options or at least another perspective on where you stand.  Give us a call today.

Call us at 800-662-8813 about bankruptcyFill out a financial evaluationChat now about bankruptcySchedule A Free Bankruptcy Consultation - Virginia Beach, Richmond, Newport News





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 The Merna Law Group, Attorneys At Law, P.C. …very helpful and friendly!5 Stars! “Everyone at the office was very helpful and friendly. The attorney answered all of our questions and helped us through the entire process. He was also very helpful answering concerns that we had after the process was completed/over. Highly recommended!” Reviewed by M.E. of Virginia Beach on Mar 11 . 
 The Merna Law Group, Attorneys At Law, P.C. Didn’t have to worry about anything!5 Stars! “Just keep providing the type of service you do. You business values are based off reliability and service. Today’s Law Offices just don’t offer that kind of experience. Didn’t have to worry about anything!!! Just being able to go on with my normal life and know that all my issues are well taken care of is a relief in itself.” Reviewed by A.P. of Virginia Beach on Mar 4 . 
 The Merna Law Group, Attorneys At Law, P.C. …debt free!5 Stars! “A friendly staff and outstanding attorney who helped me through a difficult time in my life. Thanks to everyone at the Merna Law Group who helped me move on to and new chapter in my life debt free!” Reviewed by M.F. of Norfolk on Mar 8 . 
 The Merna Law Group, Attorneys At Law, P.C. …kind and friendly from the start!5 Stars! “Everyone there was kind and friendly from the start and helped us with everything in a timely manner. They were never rude no matter how much we called or asked questions.” Reviewed by B.P. of Virginia Beach on Feb 20 . 
 The Merna Law Group, Attorneys At Law, P.C. …overall experience was outstanding!5 Stars! “My husband and I were very happy with The Merna Law Firm. They are well organized, time manageable, and friendly. I was even able to bring my children with me if I needed to. In court, they stayed right there beside us and answered all questions we had. Our overall experience was outstanding and I am glad we were represented by the Merna Law Group.” Reviewed by A.M. of Suffolk on Mar 5 .