Dear Attorney,

I really don’t want to have to file for any type of bankruptcy. Being able to refinance my house will be a huge help. I need to find a Temecula appraiser to appraise my home before I can look into restructuring my mortgage loan.

If I try to refinance my house or get my mortgage restructured, should I actually hire an attorney to help me with that? If I do decide to file for bankruptcy, is there some sort of Chapter 13 appraisal that I need to get?

I wasn’t sure if you had to have your home appraised when filing for bankruptcy or not. And does filing for bankruptcy automatically mean that I’m going to lose my home?

Cherie, city unknown

Dear Cherie,

Nobody ever really wants to file for bankruptcy, so you’re not alone there.

I have no idea what kind of debts you have or what your income is, so it’s hard to tell what you need to do, but getting your house appraised should be pretty low on the list.

First, you need to evaluate your financial situation and you should do that with a bankruptcy attorney.

An attorney will tell you if you have other options, but I will speak generally here so as to give you and other similarly impacted homeowners an idea as to some of the options available.

So far, the relief offered to homeowners available through the package announced by President Obama last week lacks any kind of mandatory cooperation on the part of lenders and simply proposes guidelines for reducing mortgage obligations.

Without the full cooperation of the banks, I don’t see how folks in the Temecula Valley area can possibly achieve any kind of significant – or even menial – solutions to their mortgage problems.

I used to believe that bankruptcy should always be the last resort, but I no longer do. Drastic times call for drastic measures.

The truth is that even if you have other options, bankruptcy is now emerging as, more often than not, a move worthy of consideration before you exhaust all other avenues.

Don’t get me wrong; bankruptcy isn’t for everyone. But homeowners facing foreclosure should not dismiss it as a last resort anymore – not just yet.

And people who may have never filed Chapter 13 before may want to consider it now. Here’s why.

If you have a second mortgage or any other kind of junior lien on your home, you might benefit from Chapter 13, where you can "strip" under-secured liens.

The process is complicated and requires an attorney who understands it and can maximize your benefits under the law.

Lien stripping is a procedure that is becoming more and more common because of the "upside-down" or "underwater" value of real property we’re seeing these days, especially in California and even more specifically in Southwest Riverside, one of the hardest-hit Advertisement

PHR Management areas in the nation in terms of the housing crisis.

The bankruptcy court has the ability to reduce under-secured junior liens (think second and third mortgages) to the value of the underlying collateral (think your house).

You cannot lien strip the first mortgage unless it is an investment property, so if it’s your primary residence you will have to pay the first mortgage. This may change in the future, but for now that’s the law.

The court will base its decision on a number of things, one of which will be an appraisal of the property.

For some people, stripping the junior liens off of their primary residence provides the relief they need to get by; others need adjustments to the first mortgage, too.

The drop in real estate values in this neck of the woods has been much more dramatic than the help offered by the government.

Most folks in Southwest Riverside are about 50- to 60-percent upside-down and this kind of deficiency simply is not addressed in this particular relief package.

You asked about modification, so I’ll tell you. Everyone who is "upside-down" should try to modify their first mortgage (and junior liens, too, unless they have them "stripped").

You can probably get a reduction in interest and perhaps a small reduction in principal.

Most lenders will put the late payments on the end of the loan or perhaps rewrite the loan, amortizing the payments over 30 years.

The process takes months to complete and communication with the lender is limited at best, so you have to be patient as well as ever-watchful to make sure the lender doesn’t go ahead and sell your house at a trustee’s sale while you think you’re negotiating a modification. I’ve seen it happen.

If at all possible, you’re better off having an attorney handle the modification for you.

I would advise against going to one of those loan modification companies you hear about because so many of them have taken advantage of desperate homeowners facing foreclosure.

And we all know that folks in foreclosure are better served by professionals willing – even obligated – to act in the homeowner’s best interests, putting the interests of all others aside, including unscrupulous lenders.

Another option available to homeowners is litigation, which, like Chapter 13, is not for everyone.

Unlike Chapter 13, civil litigation is unpredictable. It’s expensive, too.

The best way to decide what will work for you is to sit down with a bankruptcy attorney who can advise you specifically as to what your options are, how long it will take, how much it will cost and everything else you need to know.

Solutions to money problems, especially those involving real estate, are much more complicated these days. An attorney can provide the kind of direction you’re going to need.

I think that’s the best place for you to start.