Interviewer: Do you have a preferred strategy when people come to you or would you rather get them with mediation or would you rather just file a bankruptcy? Is that a last resort for even you?
James Logan: It really depends on their situation. Sometimes the bankruptcy is a better solution, if they’ve got other debts that we need to deal with. We can wrap them all up in a one payment and reorganize in a chapter 13. Many times, if they’re so far behind, 2, 3, 4, 5 years behind in the mortgage, the chapter 13 is not going to help them because the make up payment as for the regular payment is going to be much more than they can afford. For that, the only real answer is to do a loan modification and we tell people straight up, we can help you with the loan modification or you can do it on your own. Obviously, if you want us to help you with, then we’ll have to charge you for it but all we’re going to be doing is making phone calls and fax and documents on your behalf.
If a Loan Modification is Not Forthcoming, Bankruptcy Can be Utilized to Avoid Foreclosure
If you want to do that, you certainly can and you could hire us to help you with that. In many cases, if we can’t get a loan modification, they set you up for an auction. We’ll just do a chapter 7 to wipe out all the debt and give them a fresh start in that way. If they come to us and they’re not so far behind, the numbers in a chapter 13 will make sense. The mortgage payment would be $1,000 a month and the additional payment that they’ll have to make in a chapter 13 is going to be $200 – $400 a month. They can’t rent a house for $1,400 a month, so those cases make sense and we can just do the chapter 13 from the beginning.
If An Individual is Way Behind on their Mortgage Payments It May not Be a Feasible Option to Try to Retain the House
Interviewer: If people are, way behind, bankruptcy is still a solution but more of a chapter 7 where they’re not going to keep the house?
James Logan: If you get to a certain point where you’re so far behind in the mortgage, it is just not even financially a smart decision to hold on to the house. Many times people come to me and they want to hold on to the house. Emotionally, it’s a very difficult decision to let a house go. You havehad birthday parties there and you’ve lived there for 10 years and you know the neighbors, and kids go to school , but financially, it’s a no-brainer. What you would have to pay in the house to hold on to it is far more than it will cost you to rent a house somewhere else. You’re never going to own the house because there’s no equity in it, you’re under water, and it makes no sense financially to keep pouring money into a house like that. Sometimes, people will come to that realization and just say, “Okay, you’re right. Why stress myself out to hold on to this house?”
Chapter 13 is a Good Solution for an Individual Looking to Hold on to the House
Interviewer: What would you recommend for someone that’s ridiculously behind on mortgage and in real bad financial circumstance?
James Logan: A good situation is somebody’s bought their house post boom. Anybody’s bought their house since 2008 after the crash, you’ve paid a much more reasonable price and you probably got a better interest rate. Whatever has happened since then is causing to fall behind generally, a job loss, divorce or illness. If it can be cured, then a chapter 13 does make sense for them and it’s a good solution whereas they’ll just have to make their regular mortgage payment, which is affordable plus a little bit extra on top of that and they can get back on track that way.