Many homeowners struggling to make ends meet might feel that foreclosure is their only option. They may not realize that there might be a way for them to keep their home – filing for bankruptcy. A bankruptcy filing is not ideal for every homeowner, but it might be a way for you to discharge enough other debt to be able to afford to make current their past due home payments.
Although bankruptcy is an admittedly effective solution for some homeowners, allowing them to escape from underneath a mountain of debt and still remain in their homes, it is still a drastic step. Prior to filing for bankruptcy protection, bankruptcy attorneys recommend considering other debt relief solutions like:
- Short sale – where the lender agrees to sell the home for less than what it is worth in order to recover at least some of the investment; the troubled homeowner may or may not be liable for any difference between the sale price and the mortgage amount
- Deed in lieu of foreclosure – the homeowner agrees to sign the deed to the home over to the lender
- Loan modification/negotiation – working directly with the lender in an attempt to modify the terms of the loan to result in a lower, more manageable monthly payment; loan modifications can be temporary as a stop-gap measure to prevent foreclosure or they may be permanent in nature
Not Your Mother’s Bankruptcy
Though dramatic changes were made to the bankruptcy process in the past few years, filings have been on the rise. Revisions to the U.S. Bankruptcy Code have made it more difficult for a small number of people to file for Chapter 7 bankruptcy, but new filings have continued to increase, fueled by a crashing housing market and a floundering economy.
Bankruptcy was once seen by some as a failure of some kind, and was often considered shameful. That is simply not the case anymore. While bankruptcy will have an impact on your credit rating for a time, it can actually improve the credit of one who is in danger of foreclosure. Most people who file for bankruptcy can begin to positively rebuild their credit in as little as a year, allowing them to once again qualify for auto or home loans, and obtain new credit cards.
If you are having financial difficulties and fear that foreclosure of your home might be imminent, think long and hard about your options for debt relief, including the possibility of filing for bankruptcy. An experienced bankruptcy attorney can give you information about all your options and help you determine which debt management strategy is best for your unique situation.