Miami Network Realty

Bankruptcy, Short Sale or Modification? Know Your Options

Nowadays, you can't turn on the TV or the radio without hearing a discussion about bankruptcy, foreclosures, loan modifications or short sales. Air space is inundated with advertisements from attorneys and modification "specialists". Everyone is lured into attempting to use one of these solutions. It seems practically everyone is a participant in this ever growing "reality" of lower home values, income reductions and credit card interest increases. So, do you know where you stand? And when you find out, what solution, if any, is right for you?

The best consumer is always an educated consumer... Let's start by understanding the options.

BANKRUPTCY CHAPTER 13: If your home or other property is in foreclosure, this type of bankruptcy filing is appropriate as it is able to prevent the loss of a home/homestead or other property. It results in a plan to repay all or part of your debt in a period of 3-5 years, not eliminating it. It is primarily used to save a house from foreclosure and is only available to debtors with income.

BANKRUPTCY CHAPTER 7: If you have definitely decided that you do not wish to save your home, perhaps because it is worth much less than you owe, or because your present financial circumstances do not allow you to make the minimum monthly mortgage payments, then this might be the right choice. In this type of bankruptcy your car or home is not saved from foreclosure. However it does eliminate credit card and medical debts.

LOAN MODIFICATION: Although there are several loan modification options, in essence, the process involves modifying your existing mortgage loan by reducing the interest rate or extending the life of the loan, or both, in order to adjust your monthly mortgage payments down to an amount you can pay as per your current financial situation.

SHORT SALE: Is the sale of your home for an amount lower than what you still owe on the home. The lender agrees to accept the proceeds of the sale and forgive the rest of what is owed on the mortgage. It is a way for the lender to avoid a long and costly foreclosure process and for you, the opportunity to pay off the loan for less than what is owed and starting anew.