Knowledge and Financial Literacy Are Tools to Fight Foreclosures
Posted on May 22, 2009
Filed Under Foreclosure Homes | Leave a Comment
It is not money and muscle power that can help – knowledge and financial literacy are also tools to fight foreclosures. Lately the word is going around that the foreclosure victim can seek bankruptcy protection. Hence it is essential to know the facts and options related to bankruptcy.
Today it is nothing unusual for one being unable to meet mortgagecommitments when there are job losses and credit card dues. Whatever the reason often the victim caught in the net of the nation’s financial ailment thinks about taking help of the last straw – bankruptcy.
Bankruptcy is loaded with risks – one should keep this in mind while contemplating this way out of the problem. In 2005 the number of bankruptcies reached a peak when 2 million citizens rushed to file it before a more lender friendly law became effective according to AACER (bankruptcy data collecting firm). During 2006 and 2007 the bankruptcy filing numbers dropped but again started to climb up in 2008. The majority of the cases relate to personal bankruptcies.
In 2008 the rates have been described as natural and not artificial as before and after the passing of the law said Robert Lawless of University of Illinois (College of Law). The economy is a big factor. It is hurting the people and this is showing in the rise of bankruptcy cases. February this year marked the bigger year-over-year jump – 37% since the change of the law. The new angle is that there is a growing rise in real estate bankruptcies.
In a way bankruptcy does offer the chances of making a fresh start but a negative mark will be on the credit records for long seven years. This will make it difficult for borrowers to get loans with modest rates of interest. But many lawyers argue that many of their clients already come with bad credit records – so this is nothing new.
There are no hard and fast rules about when one can file for bankruptcy. Generally one starts thinking of filing when retirement savings are going down, when there is no possibility in front of clearing credit dues and when the house enters foreclosure.
Bankruptcy can halt foreclosure for the time being but one cannot get away with missed payments. Whether one files Chapter 7 or Chapter 13 bankruptcy depends on the status of the homeowner and the income level. Of the two Chapter 7 is faster and it more robustly discharges debt dues.
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