Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
When evaluating your financial situation, don’t let your emotions get in the way. Chapter 7 or Chapter 13 bankruptcy may be the right solution, especially if you have assets with no equity.
I recently met a very distressed client. He had three houses that he had been trying to keep for over two years. Two of the properties were worth over $400,000 each. One was worth about $200,000. However, on each of the properties, the mortgage balances far exceeded the value. The client had over a million dollars in property, but he owed far more than that.
As we discussed his financial goals and ability to pay his debts, I explained to him that the calculator on my desk was worth more than all three of these properties combined. He looked puzzled. After I explained that the calculator was worth something–at least a dollar–and that I owned it free and clear of any liens, I could see that he finally understood. He also understood that the house payments he’d been paying were nothing more than rent. It would be years and years before he even got to the break even point with the properties.
He had been struggling for years to keep the properties. He’d tried the HAMP (“Home Affordable Modification Program”), he’d tried negotiating, and he’d written letters. All this was to no avail. He was emotionally exhausted. My recommendation was that he file a Chapter 7 bankruptcy and surrender the properties.
He left relieved. He looked like a weight had been lifted from his shoulders. He understood that he couldn’t go on like this and was glad he took time to learn that the bankruptcy laws could give him a fresh start.
Keep in mind that the value of your property is in the equity (fair market value less what you owe on it in mortgages and other liens). If you have no equity and you can’t afford the monthly payments, you need to take a hard look at just why you are trying to keep these properties. Think with your head and not your heart. And keep focused on what’s really important in life.