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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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I have a first mortgage and 2nd mortgage on a condo and cannot

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I have a first mortgage and 2nd mortgage on a condo and cannot afford either one should I file bankruptcy on these mortgages.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.
Hello:

I'm sorry to hear about your home.

We cannot give legal advice on here, only information, so I cannot answer whether you should or shouldn't file bankruptcy. I can, however, give you some information to assist you in making a decision and in formulating questions to ask an attorney in your area if you decide to look into bankruptcy.

First of all, if you could afford the mortgages if they were current, and you want to keep the condo, you may be able to file Chapter 13 Bankruptcy. Chapter 13 allows you to stop foreclosures and forces the mortgage lenders to treat you as if you are current, while you then start making mortgage payments again as if you were current and also pay a Chapter 13 Plan payment for 3 to 5 years which catches up the mortgage arrearage. When the Chapter 13 payments are over in 3 to 5 years, you should be current on the mortgages and continue making mortgage payments thereafter.

If you cannot afford the mortgages, then you can either wait and see what happens from the foreclosures, or file Chapter 7 bankruptcy (assuming you qualify). Alabama is a State in which, if the real estate is not sold for enough at the foreclosure sale to pay off the mortgage indebtedness, the mortgage lender can still come after you for the remaining balance due after the sale (called the "deficiency balance"). However, the lenders themselves sometimes buy the real estate at the sheriff sale for the full amount owed in the hopes of getting someone else to bid higher so they get paid in full, or at least to protect themselves from someone coming in and buying the property for some really low amount, leaving them with a huge amount owed that they know they will never likely collect. So, sometimes it is a good idea to wait until after the foreclosure sale to decide if you want to file bankruptcy, because if the lender buys it, or if it sells for a high amount, or even if neither of these things happen, sometimes you never hear from the lenders again since they often write off the loss. You don't want to file bankruptcy because you thought you might need to only to find out you didn't need to. But, if after the foreclosure sale the lenders start pursuing you for a deficiency balance you can't pay, you can file bankruptcy then.

However, sometimes there are other issues which alter these rules of thumb. For example, if you own other real estate, you may want to file bankruptcy before the foreclosure sale to protect your other real estate from getting a judicial lien attached to it from the foreclosure lawsuit (which may or may not be avoidable once it is attached). Or, if your income is about to go up or recently went up, you may want to go ahead and file bankruptcy now while you qualify instead of waiting, since if you wait too long your income may be too high to permit a Chapter 7 and you would have to do a more expensive Chapter 13.

Another option might be to try to sell the real estate. If you can get an offer before the foreclosure sale, your realtor might be able to negotiate a "short sale," which is getting the lenders to release their mortgages for less than is owed and writing off the difference.

I strongly recommend talking to a bankruptcy attorney in your area who can look at your income, assets, and other circumstances in detail, so you can plan out the best course of action. Many attorneys offer free consultations, so you have nothing to lose by arming yourself with good information!

Good luck.

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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Attorney in the practice of Bankruptcy Law since 1996