As a bankruptcy attorney, I find that one of biggest concerns that debtors have is about their assets: "Can I keep my house?" "Can I keep my car?". In most cases, I can give my clients a clear idea of what property they can keep and what they may need to sacrifice in a bankruptcy proceeding. However, a more difficult question is whether the debtor should keep the property.
Although it is widely believed that home ownership is more beneficial than renting, this is not always true. The debtor must ultimately look at both the financial and the emotional factors to decide if a home is worth keeping.
On the financial side, home ownership usually is more financially beneficial then renting. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. However, the financial benefits start to disappear if the debtor owes more than the house is worth. Renters also do not pay property taxes or home maintenance, but they do have the risk of higher rent payments at the end of their lease.
Even with a house that is upside down, there are emotional considerations that go beyond the savings a renter might realize: (1) pride of ownership; (2) stability; and (3) quality of life. A family with young children that has lived in the same neighborhood for 10 years may have more of an emotional attachment to the home than a couple whose children have all grown and moved out or a family with children too young to have memories of the house.
If you are considering bankruptcy, you need to look at all of the financial and emotional factors together. Owning a home can be a rewarding experience but it can also be a financial millstone that is keeping you from getting a fresh start.
If you are in Southern California and are struggling with home ownership and heavy debt burdens, call me today (619) 448-2129 for a free consultation and a caring voice.
If you are in Southern California and are struggling with home ownership and heavy burdens, call me today (619) 448-2129 for a free consultation and a caring voice.
About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.
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