Help! I Can't Afford My House Payment

What do I do if I can’t afford my house payment?

It's not uncommon for seniors to find themselves unable to afford their house payments. This usually occurs during a period of instability, maybe when a spouse passes away or a source of income is lost. If your home is worth more than what is owed then you could sell it. You can find the value by calling a realtor and getting a market analysis of what your home would sell for without any improvements. If you would come away with some money after the realtors commission you could list your home for sale. You can even stop making payments while it's up for sale.

Where it gets a little tricky is when there is little or no equity in the home, meaning you can't sell it for enough to pay off the loan and cost of selling it. In that situation you can stop making the payment (remember: you can’t afford the payments and there's no equity), and live in the home while it goes through the foreclosure process. At HELPS we've had seniors living in homes without making a payment for one, two and sometimes three or more years. You don’t have to move when you stop making payments. Truth be told, the banks want you to stay in the home; it's safer and worth more to them occupied during this period. The mortgage contract allows you to stay so there's nothing wrong with this choice, it gives you time to save money for a future move and increased notice on when you'll have to leave.

Then you ask: will I owe money to the bank when the home is foreclosed? What about taxes? You may owe money on the mortgage, depends on which state you live in, but if your income is strictly Social Security and pension it's protected from collectors. That remaining mortgage, if there is any, simply gets added to the list of creditors, and they can’t collect. In most instances there's never even an attempt at collection. It's doubtful that you'd owe taxes because of a foreclosure. Our clients are generally classified as “insolvent” with the IRS so there are no taxes, if taxes were owed the client can be placed on an noncollectable status with the IRS. Otherwise you may owe taxes. 

by Eric Olsen President | Attorney