Atlanta Bankruptcy Attorneys Warn That Government Mortgage Program Is Increasing Foreclosures

Contrary to homeowner hopes, Uncle Sam's $75 billion mortgage modification program may be causing more bad than good.

Created early last year, the program was supposed to encourage banks to modify loans of the millions of Americans facing foreclosure. Unfortunately, it's managed to permanently modify just 35,000 - a drop in a rather large bucket, when you consider that 15 million U.S. homeowners are underwater, meaning they owe more on their loan than their house is worth. And of the homeowners that did get help, many went into foreclosure anyway since the program only required banks to lower mortgage payments - not to restore any equity.

But the biggest problem isn't that the program is failing - it's that it's given folks a false sense of security. Many homeowners held out hope that the program would save their home, so they didn't take preventative measures that could have stopped foreclosure, such as Chapter 13 bankruptcy. Fortunately, there may still be time, according to Atlanta bankruptcy attorneys.

The moment you file for Chapter 13 bankruptcy, a legal action known as the automatic stay stops foreclosure and protects you from your lender. Meanwhile, you can focus on lowering or eliminating your debt under an affordable plan. It's a legal loophole that could come in particularly handy as foreclosures increase in coming months.

While banks were "evaluating" mortgages to see if they met requirements for modification (and, unfortunately, most didn't) they were sneakily able to avoid writing off many loan losses. Why should that concern you and me? Because, until we know the true number of foreclosures, the housing market can't make a real recovery, according to the New York Times.

Simply lowering a mortgage payment isn't enough for most homeowners trapped in debt. But if those homeowners can be relieved of their debts, they might be able to free up enough cash to cover their mortgage - whether or not they receive a modification. Chapter 13 bankruptcy kills two birds with one stone by offering an effective way to reduce debt while also preventing foreclosure.

Find out if a bankruptcy plan is your answer for avoiding foreclosure for free at DebtStoppers. Just try a complimentary one-on-one debt analysis with an Atlanta bankruptcy attorney or check out one of our free community financial workshops. Why waste time - and risk foreclosure - waiting on a program that isn't working when you can save your house today?

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