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Study of Consumer Bankruptcies Shows One in Five Filed to Avoid Foreclosure on Homes

August 7, 2009

A study says more than a fifth of people pursuing a consumer bankruptcy filed to try to save their homes, HousingWire reported Aug. 5. The Consumer Credit Counseling Service of Greater Atlanta came up with that number by surveying people going through mandatory credit counseling in April, May and June. This credit counseling is required for all consumers seeking to file for Chapter 7 or Chapter 13 bankruptcy. In June, CCCS of Greater Atlanta, a nonprofit that handles this credit counseling, found that 21.6% of bankruptcy filers cited foreclosure prevention as a reason for pursuing a bankruptcy.

According to an article in the Atlanta Journal-Constitution, experts believe lenders' reluctance to modify loans is driving many people into bankruptcy. A consumer bankruptcy attorney told the newspaper that mortgage lenders frequently refuse to help customers who aren't in default -- but they also won't help people who are substantially behind in payments, believing they are a lost cause. The president of CCCS of Greater Atlanta, Susan Boas, said mortgage servicers have also been slow to respond, in part because they're overwhelmed by people who want loan modifications. But because the foreclosure process often continues while homeowners fight for loan workouts, she said, homeowners may file for bankruptcy just to get some "breathing room."

As Riverside bankruptcy lawyers, we'd like to caution potential clients that a bankruptcy filing does not automatically result in a loan modification or reduction of their loans. Bankruptcy judges may not change the principal owed on a loan for a first home, though Congress may reconsider changing that this fall through "cramdown" legislation. However, a Chapter 13 bankruptcy -- the kind our Temecula bankruptcy attorneys typically recommend for homeowners -- can stop foreclosure immediately because bankruptcy filing grants an automatic stay against all collection attempts. And in the long term, bankruptcy can help troubled homeowners by allowing them to clear other debts, freeing up money for mortgage payments. It also allows past-due payments to be part of a payment plan, giving homeowners several years to make them up.

Howard Law LLP represents troubled homeowners who are ready to explore whether bankruptcy is the right way to avoid foreclosure. We offer representation in both Chapter 13 (reorganization) and Chapter 7 (liquidation) bankruptcies, as well as aggressive negotiations for a loan modification. Our Long Beach bankruptcy lawyers start every case by reviewing the client's financial information to see if they can avoid foreclosure without bankruptcy, through our loan modification or debt settlement services. If that's not possible, we will stand by the client's side every step of the way, from determining which type of bankruptcy is best to counseling the client on the tax and credit implications of filing.

If you're considering bankruptcy as a way to stop a foreclosure and you'd like to learn more about your legal options, you should call Howard Law right away. For a confidential and completely free consultation, please call us toll-free at 1-800-872-5925 or contact us online.