If you owe more on your property than the actual property is worth, then your home is considered ‘underwater’. If you are faced with that situation, then there are some options that you can take to either remove you from the property altogether or bring your mortgage back above the surface.

Go into strategic default

This means that you walk away from the mortgage altogether and give the house back to the bank. Even though they may be able to afford the payment, some homeowners still do this. The bank will now have to sell the home for whatever they can. The bank will likely chase you down for the remainder of the money, and it certainly has a negative impact on your credit score.

File for Chapter 7 bankruptcy

You can stop payment and walk away from your mortgage by filing for Chapter 7 bankruptcy. The only state where this is not applicable is California. You will lose your home in this scenario (assuming you qualify for bankruptcy in the first place) but you are no longer liable for the mortgage debt.

Attempt a short sale

If you attempt a short sale, it means that the bank gave you the go-ahead to sell your property for less than you still owe on it. Some banks allow this if people are behind on their mortgage but have not gone into foreclosure yet. This helps avoid foreclosure and keeps the bank from taking over the house.

You can sit tight

If you can afford your mortgage payment and plan on staying in your home for the next few years, you can wait for the situation to (hopefully) reverse itself. You will gain equity as you pay down the mortgage, and home prices are likely to rebound. This is likely to happen in due time unless the initial investment was a horrible one in the first place.

About us

The law office of Jayson Lutzky, P.C. files bankruptcy for clients from beginning to end. Jayson Lutzky is a Bronx, New York attorney with over 31 years of legal experience. He has helped many highly satisfied clients as a result of their numerous referrals. Mr. Lutzky offers free in-person consultations. Call 718-514-6619  to set up your consultation and visit www.MyNewYorkCityLawyer.com to learn more about lawyer Lutzky.