Clearing the Air

I’ve been talking a lot about Chapter 13 lately, and for good reason. That’s why I want to make clear what the new bankruptcy laws mean for you (and me, and our neighbors, friends, co-workers—and basically every average Joe across the U.S.).

When passed, anyone with an unaffordable mortgage will have a good shot at being spared the misery of foreclosure. Previously, filing for bankruptcy meant lower non-mortgage debts (a good thing!) but the same high house payment (not so good). With this year’s revision, though, a judge will have the authority to change your mortgage terms. So if your loan is deemed unmanageable, it can probably be lowered—maybe by a lot. If your home has depreciated thanks to the shaky real estate market, a judge can take that into account, too. Say you bought your home for $200K. But now it's only worth $150K. She can choose to reset your mortgage to $150K to match.

This little update has the potential to save millions of homes. The only requirement is to show you first made a good faith effort to seek a loan modification from your lender (in other words, you don’t have to secure one—just show you tried). Now, loan modifications haven’t been very effective at stopping foreclosure because changes are usually minor and don’t address unsecured debts (namely, credit card debt). That’s the beauty of the new Chapter 13. It addresses everything—most of your major debts as well as your house payment.

Since there is no time limit to file, you’re not obligated to rush. But this doesn’t mean you should be idle either, especially if your home is at risk (remember, bankruptcy is the only guaranteed way to stop the foreclosure process). Truth is, whether and when you file for bankruptcy depends on your particular needs. And the best way to evaluate those needs is to talk with a bankruptcy expert.

You can read about stopping foreclosure or check out some videos on the subject at our website. Or sign up for our personal debt analysis—a free, no-strings-attached hour with one of our professionals—for advice tailored to you.

Live near Atlanta or Chicago? Consider joining our free community workshops (the next ones are Jan. 22 in Atlanta and Jan. 29 in Chicago). You’ll have the opportunity to meet one-on-one with a debt relief expert, chat with a mortgage specialist and get tips and advice from founder Rob Semrad. As if that’s not enough, we’ll also be giving away a free laptop and a GPS system. Not local? You can still order our free Financial Toolkit—a goody bag chock full of info from budgeting basics to the do’s and don’ts of bankruptcy.

Seem like a lot of info? I’m using it to make something crystal clear—you don’t have to fall victim to foreclosure. Chapter 13 changes—and all of us here at DebtStoppers—are prepared to save your home.

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