You Want to Keep it ... But Would You Buy it for the Loan Balance?

We regularly talk to individuals who, despite filing or intending to file bankruptcy, state that they want keep second homes without giving it any thought.  They should put more thought into it, because they may be missing an opportunity to create a budget that will keep them from ever having to file bankruptcy again.

To the extent it is feasible for the person to pay and the expense is justifiable (justifiable is a lower standard than "personal best decision"), this is the filer's call and there can be a lot of factors that might shape the decision.  But oftentimes, a simple framework should be to ask whether this property is - to you - really worth the balance of loans that can't be discharged or modified in bankruptcy.

How about that house in Daly City that's in foreclosure that is generating negative cash flow and needs a new roof?  The ones your friends are renting from your for a below-market rent?  They always pay on time, right?  Do you really have the means to subsidize their housing expenses? 

When a person files bankruptcy, they should understand their values and what is important to them.  Most people value their own family's financial security Fortunately, the opportunity to strip some second and third mortgages or equity lines means these sort of choices don't always have to be as difficult.  With a lot of property, you may be able to keep it by only committing to pay what it is actually worth, and you may be able to afford that by renting the property for fair rent.