How To Avoid Foreclosure By Declaring Bankruptcty

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Desperation seems to be the mother of invention in the Mortgage Modification department.

Over 3 million people are 60 days behind in their mortgage payments with little hope of finding a quick solution. This has caused many borrowers look for somewhat imaginative measures to save their home, one of these has been declaring bankruptcy to avoid a mortgage foreclosure. Does this work? Is it legal?

Chapter 13 bankruptcy does not get rid of your mortgage payments. However one in five people that went through pre-bankruptcy credit counseling claimed they were doing so to avoid losing their homes to foreclosure according to the Consumer Credit Counseling Services of Greater Atlanta which provides credit counseling throughout the United States. Is there some kind of genius in this madness? There seems to be.

Debt-collection stay.
According to the American Bankruptcy Institute filing a bankruptcy petition automatically creates a stay against debt-collection efforts which effectively stops a mortgage foreclosure even though it may be only temporarily. Obviously if the borrower continues to withhold payments the mortgage will foreclose.

Bankruptcy can create debt relief.
What bankruptcy can allow is to free resources from a household budget by reducing other sources of debt and allow a homeowner to pay for their mortgage. Can this work for you? That is something you can ask when you undergo pre-bankruptcy counseling.

There are two lessons we can get from this.
First don’t give up, find any possible solution to losing your home even if it means using creative methods. Too many people fall into desperation and don’t search for what options they have to overcome the current financial crisis. The government is opening a variety of options to save the millions of homeowners that are facing foreclosure from losing their homes. The measures are slow to come into action and you can guess who are getting the best results, the ones that are pushing the hardest.

There is a Spanish saying that doesn’t translate that well but gives a good idea of the point I am trying to make: “The baby that doesn’t cry doesn’t suckle”, meaning that the baby that cries the most has the biggest chances of getting fed. Something similar occurs with debtors and borrowers.

Second, before you do anything, especially file bankruptcy to save your home, find quality counseling from an unbiased and qualified source.