By John G. Merna, Esq.
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.
How Chapter 13 Saves Your Home in Virginia
Chapter 13 bankruptcy is designed for situations where you have fallen behind on mortgage payments but have income to catch up. The moment your case is filed, the automatic stay stops any pending foreclosure. Your missed payments are folded into a court-approved repayment plan lasting three to five years.
During the plan, you make your regular mortgage payment directly to your lender, plus an additional monthly amount to the Chapter 13 trustee that covers the arrears. Because the missed payments are spread over years rather than demanded all at once, the monthly cost becomes manageable.
When Chapter 7 Is the Better Option
If you genuinely cannot afford your mortgage even without other debts, Chapter 7 may be the better answer. A Chapter 7 filing eliminates your personal liability on the mortgage — the lender can take the house through foreclosure but cannot pursue you for any remaining balance. You walk away clean to rent affordably while rebuilding credit toward future homeownership in as little as two to three years.
The Loan Modification Alternative
Some homeowners pursue a mortgage modification before or alongside bankruptcy. Filing Chapter 13 can give you breathing room to negotiate with your lender while the automatic stay prevents foreclosure. If the modification is approved, your Chapter 13 plan adjusts. If denied, the plan remains your safety net.
Take the First Step
A free consultation with Merna Law will review your income, mortgage balance, and other debts to determine whether Chapter 7, Chapter 13, or a non-bankruptcy alternative fits your situation best.
Call 1-800-662-8813 for a free confidential phone consultation.
Last reviewed by John G. Merna, Esq. | July 2026
Related Guides
For a detailed look at how Virginia exemption laws protect your home equity, see Can I keep my house in Virginia bankruptcy? If you are still deciding between chapters, our Chapter 7 vs. Chapter 13 comparison explains which option fits different situations. And if you ultimately decide to let the home go, know that buying a house after bankruptcy is possible sooner than most people think.
