It’s no secret that the explosion of the American housing bubble caused a financial tsunami, resulting in the greatest number of foreclosures since the Great Depression. The sharp decline in home prices left many homeowners underwater, unable to keep up with mortgage payments because of unemployment or medical costs, resulting in the necessity to either sell short or lose their homes through foreclosure. Often, these options lead to deficiency judgments which in turn are either immediately preceded or followed by bankruptcy filings.

Almost 900,000 homes were lost to foreclosure last year, translating to one in every 54 families nationwide. At the same time, there was a 32 percent increase in bankruptcies during 2008. Of these, 28 percent were Chapter 13 filings, most directly related to mortgage problems. Overall, those who keep track of these things say that there have been close to 12,000 bankruptcy filings per million American households.

We know that bankruptcy wipes out debt caused by foreclosure in non-recourse states, but those who live in these states must educate themselves on the anti-deficiency statutes in their particular state. Some of these non-recourse laws apply only to the original loan that was used to buy the property and consider second mortgages and home equity financing to be recourse loans which are expected to be repaid. Additionally, some states allow lenders to go after a borrower for the difference between the debt and the current fair market value of the home, an amount that can also be taxed by the Federal Government.

The Mortgage Debt Relief Act of 2007 states, in part, that even if a debt is forgiven, the unpaid amount is considered taxable income. However, the act makes an exception to this rule if the case involves the debtor’s principal residence. It also exempts debts due to insolvency and when discharged through bankruptcy. However, it is well to keep in mind that every state makes its own rules and regulations concerning foreclosures and bankruptcy, so talking the situation over with an attorney who specializes in these areas is the wisest course for any troubled homeowner.

In short, although bankruptcy often seems like an unpleasant choice and may do significant damage to one’s credit rating, it is frequently the best option for dealing with foreclosure and is becoming common enough to be the norm rather than the exception in these shaky financial times. When facing foreclosure, consultation with a bankruptcy attorney should always be the first step out of the morass of a personal economic crisis.

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It maybe the worst thing ever to do, but sometimes you just have to file a personal bankruptcy. It is not easy but when your situation calls for it, there is nothing much you can do about it.

So early on, you should know the telltale signs of personal bankruptcy so you can get yourself out of it before the whole thing blows up. Usually, a person that experiences loss of income, job loss, or personal business failure is headed for personal bankruptcy.

Others have excessive student loan debt that they need to pay back using their income while some need to pay up the debts resulting from accidents or serious illness that happened in the family or to themselves.

Sometimes all these are too much for other people leading them to ultimately file for personal bankruptcy. Everyone needs to make their own decision and check the alternatives.

But sometimes, just sometimes, there are ways to avoid being in this situation. People sometimes file for debt consolidation loans. Some go for credit counseling and have a debt management plan made for them while some send consumer proposals to creditors.

But if these options would just not work for you, then perhaps knowing the advantages and disadvantages of being in this financial situation might lessen your load even a bit. Some of its advantages would be protection from collection action, legal action, and wage garnishes.

Filing for personal bankruptcy also gives you the privilege of having your unsecured debts eliminated. Also, it is quicker than any other option and is not that expensive, too. On the other hand, being in this financial fiasco makes your credit history look bad.

Moreover, you might be obliged to turn over to your trustee some of your possessions and you also will be required to keep track of all your expenses while you are at it.

New Bankruptcy Laws Will help many become financially free Learn about the Bankruptcy Pros And Cons

If you are facing foreclosure, your biggest concern right now is how to save your home. Nothing else really matters. You are facing an uphill battle, but it is not impossible to stop foreclosure. Filing for chapter thirteen bankruptcy is last resort way to keep from losing your home.

Chapter thirteen bankruptcy offers a way to keep the mortgage company from foreclosing on your home. When you file, the foreclosure stops immediately until the bankruptcy process is completed. With this type of bankruptcy, you submit a plan to repay your debts. However, this plan is scrutinized by your creditors and must be accepted by a judge in order for the bankruptcy to proceed.

The first step in filing for chapter thirteen is to attend credit counseling. This is required by the bankruptcy code. Only certain agencies are approved for this counseling, so be sure to consult with your bankruptcy attorney to make sure the agency you use will qualify. The agency may come up with a plan for you to pay back your debts. If so, you have to give a copy of the plan to the court when you file for bankruptcy.

You are given fourteen days from the time you file for chapter thirteen bankruptcy until your proposed repayment plan has to be on file with the court. This window can enable you to go ahead and file if you need to get the foreclosure on your home stopped before you can finish your plan.

After filing, a creditor’s meeting will be set up. You must appear at this meeting to answer your creditors’ questions about your repayment plan. Some of your creditors may question the amount you are proposing to pay. They want to make sure that you will not have any money left over after paying your debts and necessary living expenses.

After the meeting has been conducted, the bankruptcy judge can take up to 45 days to approve or deny your proposal. In any case, you are required to start making the payments proposed under the plan within 30 days, so that means you may have to start paying on the plan before you know whether it will be accepted.

The biggest drawback to using chapter thirteen bankruptcy to stop foreclosure is that if you are unable to pay the payments as agreed, you could still end up going through foreclosure. The judge can dismiss your case or make you go through chapter seven, where your assets are sold to cover your debts, if you don’t pay everything as agreed. For this reason, you should consider all of the potential risks and benefits before deciding to go ahead with filing for bankruptcy.

For assistance with loan modification contact a qualified loan modification attorney that will look out for you and your family’s best interest such as Janian and Associates.