When A Loan Mod Won't Stop Foreclosure, Filing For Bankruptcy Will

Since the real estate meltdown, that began in 2007 and has continued to escalate, Congress has been unable to pass any kind of legislation that would allow Americans struggling to make their payments to modify their mortgages. Back in 2008, Pres. Obama promised 9 million families that he would help them avoid foreclosure. After reading the most recent numbers for 2010 it appears that the HAMP program is failing terribly. There have been five times as many people kicked out of the program than those that have received any kind of relief. That doesn't sound like much success in a time of what the White House calls economic recovery. And the foreclosure and bankruptcy problem continues to roar.

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Recently, some union leaders came up with an idea to sell all their stock and bonds invested in financials if the banks don't start modifying mortgages to help homeowners stay out of foreclosure. The unions reportedly have approximately 300 million invested, and many felt that it was not all hollow threats. Back in 2009, there was some legislation on the table to modify mortgages when an individual is filing Chapter 13 bankruptcy. The bills that were proposed were killed because of the large lobby that the financial institutions have in Washington.

On one of the cable news stations, they reported that a union leader was conspiring to try and get struggling homeowners as a collective group to not make any payments to the banks. They felt that the banks would fail if everyone collectively stopped making their monthly payments. This group of struggling homeowners that is facing foreclosure and or bankruptcy does make up a large collective group. But, due to the lack of necessary organization they are no match for the well-funded financial institutions.

Because of the struggle being an ongoing problem, individuals facing foreclosure should consult with a bankruptcy attorney to see if filing for bankruptcy would be an option that would allow them to stay out of foreclosure and keep their home. If the homeowner wants to surrender their home the best option for them would probably be filing Chapter 7 bankruptcy to wipe out any deficiencies if the property is under water. A Chapter 7 bankruptcy would also be beneficial if the debtor has a large amount of unsecured debt. Many times credit card debt is a large part of why an individual is having trouble making their mortgage payment. Wiping out all the unsecured debt can sometimes make the house they are losing all of a sudden affordable.

On the other hand, Chapter 13 bankruptcy has the power of the court behind it. A Chapter 13 will allow the debtor to negotiate with your creditors a payment plan that will last 3 to 5 years. With a Chapter 13 bankruptcy the debtor can work something out with the mortgage holder to get caught up on back payments and many times strip off the second if the house has gone down in value. When the house drops in value beneath the first trust deed, the second becomes unsecured because there is no value to the property that would secure the loan. In a Chapter 13 bankruptcy debts are paid by priority with secured debts, like a mortgage or an automobile, are paid first and unsecured are paid last. Any unsecured debts that are left at the end of the Chapter 13 payment plan will be discharged.

When it comes to stopping a foreclosure, filing for bankruptcy is king. At the top of the list is Chapter 13 bankruptcy for protecting your property. Filing bankruptcy can be complex and should be done with the help of a bankruptcy attorney that is experienced with situations like yours. Before it gets too late, consult a bankruptcy attorney to see if filing will help your situation.

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