Q: Tenants in our PA property just gave notice, and we cannot support that mortgage as well as ours here in CO. Bankruptcy?
Home in PA is a VA loan that we've had for 11 years, and is still underwater (~$60K) since the 2008 crash. We recently closed on our home here in Berthoud, CO, and have virtually no equity built up. Wife laid off last April, only on one income (mine). Our PA tenants just gave notice that they would be out at end of November. We cannot afford the mortgage on our rental property - that was once our Primary, but we couldn't sell it when we had to move back to Colorado - and our home here in CO. Would really appreciate some guidance on whether to just let the PA go into forclosure or if we should pursue Bankruptcy protections so that we are not forced from our current home. Thank you for your time.
A: Without knowing your entire financial picture, I cannot determine whether a bankruptcy would be right for you. A bankruptcy would relieve you of liability for the PA property, but I can't determine whether it would protect your other assets. Since you apparently have not lived in Colorado for at least two years, you would be required to use either the PA or the federal bankruptcy exemptions to protect your other property. Whatever you do, keep the Colorado mortgage current. The lender on the PA house may foreclose without a deficiency or agree to accept surrender of the home in full satisfaction of the mortgage debt. It does not hurt to ask. Seek a competent bankruptcy attorney to determine all the options.
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