My Father Wanted a Divorce and Filed Bankruptcy. Mom is Now Stuck With the Full Mortgage. – Siu

“Dear Andy,

I need help, asap. Okay, my parents had the current house for 15 years, and refinanced it and got a 2nd mortgage on it and all that. 2 years ago, my father wanted a divorce. He filed for bankruptcy to discharge debt, however, my mother (listening to her friends) refused to sign on to the bankruptcy and so was left with the full of the house and utilities and all of that. Now she is paying 2 mortgages on the one house and simply cannot afford it. I gave up my apartment downtown and moved back in with her to help pay, because she was taking care of her sister who was sick before she passed. But, it’s still just too tight. She still owes about $240,000 on the house, but it would only sell at most for between an estimated $120,000 and $180,000. We’ve limped through 3 years together, but, enough is enough.

If she could get rid of that house and get in an affordable living space, her financial situation would be so much better. She already doesn’t have very good credit and doesn’t want to just walk away from it. After a bunch of bad advice that got her in this hole, I need to get her some GOOD advice for a change. Help, please. Is there ANYTHING she can do?

Siu”

Dear Siu,

Enough is enough. You said it right. By your estimate the house is worth between 50% – 75% of what is owed and even with both incomes it’s still a struggle. It’s going to be years before the home has enough value to refinance or sell by traditional means and it doesn’t sound like either of you want to continue in this position for years to come. The one option to keep the home may be if your mother filed bankruptcy herself. This could potentially strip the 2nd lien and create a better equity situation on the home. It might be worth looking into as a last resort if keeping the home is important.

If BK is not possible or still doesn’t help then it’s probably time to let the house go. Unless your great-great grandfather built the home with his bare hands using the only the lumber from the ship he emigrated here on, then the house is just not worth keeping anymore. You should contact a local real estate broker that has a good working knowledge with short sales. Get the home on the market right away at a very competitive price and try to find a buyer that will pay as close to market value as possible. Your real estate broker will submit this offer to both lenders to get their approval to accept less as a payoff. If it’s done right your mother may be able to go to closing and walk away from the house altogether, without paying a dime and without a foreclosure on her record. This will probably be her best bet to get rid of the house and begin rebuilding her credit profile again.

As for making payments during the short sale process. It’s up to her. If she doesn’t make payments then her credit will further worsen until the house sells, and if it takes way too long to get it sold, it could also result in an eventual foreclosure. On the bright side, instead of making payments that money could be saved towards building a reserve and lining up a new place to live when the house does sell. It can take 3-9 months for a short sale to be complete and that could amount to a substantial savings during that time. Is it worth it? Only your mother can answer that question.

Please keep us posted on your progress or feel free to ask further questions in the comment section below. I am subscribed to this post and always do my best to respond promptly. Good Luck!

Best Regards,

Andy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.

If you have a mortgage, short sale, real estate, or loan modification question you’d like to ask just use the online form. I’m happy to help you totally for free.