|Image courtesy of Mister GC |
Some make the argument, the mortgage is the same or less than rent. There is some merit to that argument. One problem is everything else … taxes, maintenance, repairs on the house as well as contents in the house (like a broken oven), etc. Renting limits exposure to additional costs.
I once had clients who kept their townhome through a bankruptcy. They were upside down on the mortgage but kept it anyway. About 6 months later, they called me with a water problem. They believe the grading of the grounds outside the home caused the rain runoff to roll into their unit (not the type of cases I work). They found mold under their siding and carpets. They were just coming out of the bankruptcy and did not have the funds to fix it or litigate it with the homeowners’ association to repair the grading and damage.
They did not reaffirm the mortgage so they could still walk away. But they spend 6 - 9 months of mortgage payments they could have used to plan their exit and sustain a new rental home for their family.
Many clients think the would need to leave the house immediately when they file for bankruptcy. That is not true. The mortgage company would need to ask the bankrupcty court’s permission to start or continue a foreclosure action. This takes time. While that is happening, the family can stay in the house. Once the bank gets a judgment in the foreclosure, it still needs to schedule the sheriff’s sale. All this takes time. This is time a debtor can use to prepare for the next steps after bankruptcy. He or she can save the money they would be paying on their mortgage.
While I know many of my clients will not leave their homes if they have any chance of saving them, it is a discussion debtors should have with their bankruptcy attorneys.