Our objective in helping clients who are buried in debt and behind on their mortgage payment is helping them preserve their family home. We have helped many people file Chapter 13 bankruptcies in Kansas and Missouri to protect their family home. Depending on the specifics of your situation there may be a number of strategies for protecting your most important asset, but sometimes a Chapter 13 bankruptcy, loan modification or other strategy will either not work or does not make economic sense. Even if it is not feasible to keep your home or does not make economic sense to do so because you are too far upside down, foreclosure can still have a number of undesirable consequences. A foreclosure may result in significant long-term damage to your credit and can even expose you to a deficiency judgment (for the difference between the value of your house and what you owe). A short sale or deed in lieu of foreclosure can be a way to avoid the negative consequences of a foreclosure.
When facing foreclosure of your home, the decisions you make can have consequences that will affect your financial future and lifestyle for many years. It is important to obtain legal advice from an experienced bankruptcy lawyer so that you can make a decision that will have the most long-term benefits for you and your family. A knowledgeable Kansas City bankruptcy lawyer will carefully analyze your financial picture to determine if a short sale or deed in lieu of foreclosure is a prudent strategy for you.
When the real estate market collapsed, many homeowners, who had faithfully made payments on their home for years, suddenly found that they owed far more than their house was worth. If you owe substantially more on your home than it is worth, you may be able to sell your home for less than the outstanding loan balance and have your lender accept the proceeds of the sale as full satisfaction of your loan. This type of transaction is referred to as a “short sale” and can prevent the negative impact associated with having a foreclosure on your credit report. A short sale involves a buyer paying less than the outstanding balance on a mortgage with the funds from the sale being paid to the lender who considers the loan completely satisfied. This can be an effective strategy if you are not eligible for a Chapter 13 (e.g. you obtained a prior bankruptcy discharge too recently) or loan modification. Because a short sale protects your credit, a seller is typically in a position to buy another home more quickly than if the person simply walks away and allows a foreclosure to proceed.
Although short sales have significant benefits in terms of protecting your credit and protecting you from a potential deficiency judgment, federal and state tax authorities may treat the amount of the loan that is forgiven as income. It is important that you obtain the advice and counsel of an experienced bankruptcy attorney regarding whether a short sale is a good option in your specific situation and the potential tax consequences.
A Deed in Lieu of foreclosure is another option, which may prevent the adverse impact of a foreclosure. This type of transaction basically involves giving your home to the bank. It is important to have a lawyer review the transaction and all aspects of your situation before you move forward. An experienced Kansas City bankruptcy attorney can make sure you are aware of all of the possible options as well as their potential consequences.
We are pleased to handle bankruptcy cases in Kansas and Missouri. We handle family law cases throughout Johnson County and surrounding counties in the Kansas City metropolitan area. Weekend and evening appointments are available. To reach our Olathe law office, call 913-782-7075, or contact us online.
Weston R. Moore, Attorney at Law
13401 South Mur-Len Road
Olathe, KS 66062
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