Since the real estate meltdown, filing for bankruptcy and foreclosure go hand-in-hand. Recently, the mortgage industry thought they could fix the financial problem. They went to Congress to convince them that giving bankruptcy judges the ability to modify first trustees in a cramdown was totally unnecessary. A couple of years ago this item was front page news and now it has been forgotten about. The lenders are modifying mortgages but at a very slow rate. Recently, economists have been reporting that option arms are going to be the next shoe to drop on our fragile economy. Those individuals defaulting on option arms are growing every day and there is close to 1 million that will soon reset next year. The basis for an option arm mortgage was that it allowed individuals to set their payment plan of principal and interest, or interest only, or the worst one yet, just make the minimum required payment which allows the principle to add on the back of the loan. These loans were set up to reset in five years and are now coming due. With many people having expensive real estate with these kind of loans, you can see how many of these people end up filing bankruptcy and losing their home to foreclosure.
Debtors that are caught up in this option arm loan situation should be proactive and consultant a bankruptcy attorney to see what their options are. In many of these loans, the principal balance has risen to the point where bankruptcy might be able to wipe out second and third mortgages. If the loan is due now, the loan could possibly be modified in a Chapter 13 bankruptcy. A bankruptcy attorney can negotiate a loan modification with the lender to lower the interest and possibly the balance due. This generally will only work for those that have sufficient income continuously coming in. It's important to move quickly and review all of your options when facing possible foreclosure. Filing for bankruptcy might be your answer to your situation. Be proactive and check out all possible scenarios.
Nowadays, the news reports about foreclosure defaults in the housing market. Some of the defaults that are happening occur because the borrower decides to give back the home to the lender. Many of these debtors have great credit and have the financial ability to continue making the payment. The reasoning behind them walking out is the value of the property is way below what is owed. Although, it will hurt the credit score of the debtor there is an upside where they save on massive negative equity. Some of these individuals end up needing to file bankruptcy to wipe out the deficiency on the property. In today's current economy where corporate America uses bankruptcy to protect themselves, it doesn't make sense for individuals to avoid using the same reasons for bankruptcy.
The reason that most people file bankruptcy is not because they don't want to pay their bills, but because today's creditors have become very aggressive trying to collect. After individuals all flock to file for bankruptcy the automatic stay goes into place which stops creditors from attempting to collect on any debts. It also will temporarily stop foreclosure. This stress relief will give individuals a chance to answer their phone again. After the bankruptcy is discharged, the debtor will have a fresh start. They will have a second chance being debt-free moving forward in life rebuilding their credit so they can live again.
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