You may not want to consider bankruptcy. It is not a step you should take lightly. But you may be struggling to pay bills and make a house payment, and you may owe as much as the house is worth. Under some situations, you may even owe more than the house is worth. You should be aware that bankruptcy may provide relief from the financial strain.
Real estate brokers tend to speak enthusiastically about the prospect for soaring home values in the future. But Arkansas home values may not be rising rapidly like they are in other parts of the country. You may not be missing out on the large increases that a seller led you to believe in when you bought your home.
Not all bankruptcies require moving out of your home
Your bankruptcy may not require you to move out of your home. Bankruptcies in Arkansas allow you to affirm debts related to assets, like a home, that are worthwhile to keep. Your low or negative equity in your home may actually be helpful in restructuring debt to your advantage. If your home were worth much more than you owe, the court might actually be more likely to force a sale of it to recover cash to pay other creditors. However, this is rarely the case in bankruptcy.
It may be to your advantage to move to a less expensive home
What if moving out is on the table? Once your debts are discharged in bankruptcy, you may have a better chance at renting or even buying a home that fits your life situation and budget. Your credit rating does suffer in bankruptcy. But some find that they are actually in a better position post-bankruptcy than they were before. You will have relief from debt, lower payments, and the assurance that your debt reorganization is behind you. These factors give creditors confidence.
Would you buy your house again for what you owe on it?
If you do not have equity in your home anyway, you may have very little incentive to stay in it. Would you buy your house again today for what you owe on it? If the answer is no, it may be in your best interests to walk away.
A home may represent a lot of emotion. Those emotions may include happy memories, or just a sense of duty to pay a mortgage regardless of how your circumstances have changed. But you should consider the relief from stress and the chance to make financial progress that bankruptcy may represent.