Michigan Short Sale Attorney

Here are detailed explanations of some alternatives to a short sale:

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy, often referred to as “liquidation” bankruptcy, allows individuals to discharge qualifying unsecured debts. It involves the liquidation of non-exempt assets to satisfy creditors.

This option provides a fresh start by wiping out certain debts entirely. In many cases, individuals can keep essential assets through exemptions.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy is a reorganization plan where individuals with a regular income create a structured repayment plan to address their debts over three to five years.

It allows individuals to retain their property while catching up on missed payments. It’s particularly useful for those with a stable income seeking to avoid a short sale.

Debt Negotiation and Settlement:

Negotiating with creditors for debt settlement involves reaching an agreement to pay less than the total amount owed, often in a lump sum or structured payments.

This approach can result in reduced debt amounts, providing relief without the need for a short sale. It is particularly useful for unsecured debts.

Loan Modification:

Loan modification involves negotiating with your lender to modify the terms of your mortgage, such as interest rates or the loan term, to make it more manageable.

 It allows homeowners to keep their property while making the mortgage more affordable. It’s a suitable option for those facing temporary financial hardship.

Forbearance Agreement:

A forbearance agreement is a temporary arrangement with the lender that allows homeowners to reduce or suspend mortgage payments for a defined period.

 It provides short-term relief, making it suitable for those experiencing temporary financial difficulties and aiming to avoid a short sale.

Sell and Rent Back:

Some companies offer a “sell and rent back” option where homeowners sell their property to an investor and then rent it back.

This allows individuals to access equity without moving, but it’s essential to carefully review the terms and potential drawbacks.

Refinancing:

 Refinancing involves replacing an existing mortgage with a new one, often with more favorable terms.

It can lower monthly payments or adjust the loan term, providing relief for homeowners facing financial challenges.

When considering alternatives to a short sale, it’s important to consult with our bankruptcy attorneys, or other professionals to assess the best strategy based on individual circumstances. Each option has its merits and considerations, and a tailored approach is key to achieving the most favorable outcome for the individual’s financial well-being.

A short sale is when a mortgage company gives a homeowner permission to sell the house at a reduced price, without paying the full amount owed. While it sounds like a preferable arrangement, especially for those facing foreclosure, short sales can actually be highly complex and troublesome for the homeowner.

Some of the pitfalls of short sales include:

• The mortgage company requires the homeowner to go through multiple steps with no real promise that the short sale will be approved.
• Short sales have a possible tax liability. The debtor may be required to pay income tax on the deficiency. A large tax bill from the IRS may result from a short sale in many cases.
• The debtor may be responsible to make up the difference between the unpaid mortgage and the price the house is sold for. The end result may be that there is a very large debt still owed on the home after the short sale is completed. Bankruptcy may be a better option either before or after a short sale.

For these and other similar reasons, many people find that bankruptcy is the better option for mortgage debt relief.

As per Statista’s data, Michigan witnessed a decline in business bankruptcy filings in 2022, with 220 cases reported. [1]

Bankruptcy is a court procedure that either cancels most debt completely chapter 7, or reorganizes it into a creditor repayment plan chapter 13. Either chapter of bankruptcy places an automatic stay or injunction on all creditor actions, including foreclosure. Whether you actually keep your house depends on your financial situation and the chapter of bankruptcy you file.

Chapter 7 cancels debt and generally results in debtors giving up their house if the debtor cannot make the payments and wants to cancel the debt. In other cases, a Chapter 7 debtor may keep the house and reaffirm the debt or seek to modify the loan with the lender. If the home is surrendered, the debt is canceled. This allows the debtors to walk away from the payments without the negative repercussions of a short sale.

In a Chapter 13, debtors consolidate debt into a single affordable payment. The reorganization often reduces debt enough that the debtor can afford the mortgage on the house and can make up past due payments. Debtors can keep their home so long as they continue to make the payments to the Chapter 13 plan.