It’s no secret that the housing downturn produced a record number of defaults and resulting foreclosures. The worst days are behind us, but many homeowners are still struggling to pay the mortgage. In the event you do fall behind on the mortgage, it’s generally a good idea to try to maintain the following bills for the reasons I mention below.
See also: How long does foreclosure take?
Some Have Understandably Given Up
While there are quite a few struggling to keep their homes, their is another class of homeowner who simply can’t afford to maintain their mortgage. For this group, it’s not a matter of if the bank will foreclose, but when. They’ve completely stopped making mortgage payments and diverted housing payments to groceries, transportation or other family expenses.
Is Default a “Good” Strategy?
Although no one wants to experience foreclosure, this strategy makes some sense. The banks don’t have the resources to foreclose on all the homes that are past due. As a result, foreclosure could take a year or more. During this time, the family who is not making mortgage payments can meet all of their other expenses while possibly saving extra money for a new place to live. However, those who have completely given up on making their mortgage payments can’t totally abandon all costs associated with their homes. Below is a list of crucial bills to continue paying even if you’re behind on the mortgage:
This is a fairly obvious one. If you’ve decided to live in your home during the foreclosure process, be sure to maintain utilities. Failure to do so will result in the lights being shut off. Not much fun for you or the kids. Pay the utilities even if you’re not paying the mortgage.
Another big one. This is where the foreclosure backlog works against you. Until your home is sold at foreclosure, you’ll be obligated to make HOA payments. In fact, the HOA can sue you for past due payments. Not a pleasant experience. Avoid the stress of HOA harassment. Even if you can’t afford the mortgage, keep up with the HOA dues (think of the HOA as rent). For more information about HOA dues and troubled homes see: I surrendered my house in bankruptcy, you mean to tell me I still own it?
Many homeowners are used to homeowner’s insurance payments coming out of an escrow account set up by their lender. As a result, they often don’t remember to keep up with insurance payments even after they’ve fallen behind on the mortgage. This is a big mistake with potentially devastating consequences. If you’re like so many other Americans who can’t afford their mortgage, fine. But don’t allow past due mortgage payments to leave you exposed in the event something happens to your home. Pay your homeowner’s insurance even if you’re not paying the mortgage.
Well, there you have it. Maintaining the bills listed above will keep you in fairly good shape in the event making the monthly mortgage becomes an impossibility. The foreclosure backlog is real. You likely have some time to plan your next move even in the midst of foreclosure. Remember: it’s always darkest before the dawn and good luck.
Rob Cohen, the Managing Partner of Cohen & Cohen P.C., is a bankruptcy attorney that practices in Colorado and Wyoming. He serves as a Chapter 7 Bankruptcy Panel Trustee, and has to date administered over 8,000 Chapter 7 bankruptcy estates. Rob is a Certified Consumer Bankruptcy Specialist, and was nominated for Denver Business Journal’s 40 under 40 in both 2014 and 2016.