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Can I Keep My House But Discharge My Mortgage in Bankruptcy?

“Dear Steve,

I have $38,000.00 in credit card debt. I lost two jobs during the recession and took early social security at age 62 to survive. I barely pay the mortgage and necessary bills. I stopped paying all credit cards about three or so months ago. My house is approx $125,000. underwater. Because I got a loan modification a few years ago I have been able to stay current on mortgage payments.

I have two main questions:
1. Is bankruptcy the best option for me?
2. If I file for bankruptcy, clearly I would not reaffirm such an upside down mortgage. If the home is discharged in the bankruptcy will I be able to continue to live in it if I stay current on the mortgage payments?

THANKS FOR THE HELP.”

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The Answer

Before you file bankruptcy, which sounds like a logical approach based on what you shared, I would suggest you first let the bank foreclose on the house and take it back. Otherwise you’ll wind up discharging the mortgage but still be on the hook for the house.

Talk this over with a local bankruptcy attorney.

I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction.

Then use the free How to Get Out of Debt Calculator to review your options.

Once you’ve identified a company you want to work with, then follow my step-by-step guide on how to check out a debt relief company.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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