March 17, 2011

Bankruptcy Can Save Your Home

Posted in Bankruptcy tagged at 11:59 am by demetriagraves

Many clients seek my advice when they are concerned about losing their home. Often by the time the foreclosure notice arrives, most struggling homeowners figure they are out of options. But there is one more step which is often overlooked that can help save your home – Chapter 7 Bankruptcy. It’s not a move to be taken lightly. But the impact may not be as dire as many people assume. In fact, homeowners facing foreclosure may be able to improve their credit with a bankruptcy filing.

Homeowners facing foreclosure also have several options to minimize the long-term impact on their credit, even if they ultimately lose the house. If the lender agrees to a short sale, for example, you may be able to sell your home for less then you owe. In a so-called “deed in lieu” of foreclosure, you give the lender the deed to your home and avoid a formal foreclosure proceeding. By doing so, you’ll avoid the devastating damage to your credit brought by a foreclosure.

If none of those steps work, bankruptcy may provide relief for the worst case of a foreclosure judgment, and inflict less damage to your credit. Bankruptcy automatically stops the foreclosure process, giving you and the court time to try to get you back on track with your mortgage payments. That help can make a big difference for homeowners struggling to deal with a lending industry overwhelmed by the mortgage mess. Many people don’t realize that the consequences of a bankruptcy filing may be less severe than a foreclosure.

Bankruptcy laws, after all, were established to provide an orderly process for people in financial trouble to handle their debts, start fresh and rebuild their lives. Most people file bankruptcy because of some incident that is out of their control – like a divorce, or loss of job, or the death of an earner in the family or some major medical event that wipes out their savings.

With home prices falling, unemployment near 9 percent and wages stagnant, the volume of fillings continues to rise. Last year, some 1.5 million consumer filings were reported, up 9 percent following double digit gains in each of the previous three years, according to the American Bankruptcy Institute.

As government mortgage relief programs have fallen well short of their goals and lenders struggle to find solutions, bankruptcy has become a potent weapon for those hoping to save their home from foreclosure. A bankruptcy filing may not guarantee you’ll be able to keep your home. But it stops the process and buys time while the court reviews your financial situation.

If you have questions about filing for bankruptcy I offer a free 30 minute telephone bankruptcy consultation where we can discuss your debt situation and determine if you qualify for a chapter 7 bankruptcy.

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