Keeping a Dead Home

I usually recommend against keeping a "dead home". My office files a lot of chapter 7 bankruptcy cases in the State of New Jersey and the story of individuals wanting to keep a "dead home" seems to repeat itself. Let me explain. I have many clients who are 1 year or more behind on their mortgage payments. They are working with an agency that specializes in loan modifications. The home is usually a multi-family unit where they are receiving rent from a tenant. The owe a lot more on the mortgage then the home is valued. There is very little chance they will keep the home. They, however, still decide to reaffirm the mortgage on the bankruptcy petition and keep the home. Why? There are several reasons for this. The obvious being that they have a sentimental value to the property and do not want to let it go. The second being that they are afraid to move to a new place for the fear that they will not be able to secure a rental lease with their credit. The third is because they want to keep earning the rental income they are receiving from the tenant. They may not have any other source of income or this source may contribute to a major part of their earnings. I am quick to advise them that the Bankruptcy Court will frown on this behavior and the Trustee will ask that the money be turned over and sent to the mortgage company. The advice that I give to these clients is: hand the keys to the mortgage company by doing a Deed in lieu and walk away from the property. With a deed in lieu the mortgage company will forgive you for the balance on the mortgage in return for you turning over the keys. There is no reason why you should keep a dead home.