Many homeowners have been struggling with their home loan payment over the past months and as a result have faced foreclosure. While there are home loan modification programs, as well as other governmental mortgage assistance options, many homeowners have reportedly been turning to bankruptcy to save their home from foreclosure. While many people feel that it is odd or even dangerous to use bankruptcy as a way to avoid losing a house, there are arguments that it is a beneficial means of keeping one’s home.
One of the main arguments in favor of using bankruptcy as a way to avoid foreclosure is that it simply stops the foreclosure process and allows the homeowner to get their finances in order. While there are certain types of bankruptcy that may not be beneficial for particular homeowners, some have used bankruptcy as a way to stop the foreclosure proceedings, which give them time to catch up on payments or get rid of unsecured debt, which would leave them only owing money on their mortgage.
Also, some have argued that by filing bankruptcy, specifically Chapter 13, homeowners will have additional time to get their financial life in order and will be able to live within an income-based budget when making payments on the various debt. Many homeowners have simply been seeking a way to stretch their income further and pay off their debts, so this is the way that many have used to do just that. Homeowners who are committed to paying off their debts but may not have an income that affords them the ability to do so, but some have benefited from income-based repayment plans in the past.
However, despite these reports of homeowners using bankruptcy as a way of avoiding foreclosure, homeowners are highly cautioned whenever they consider this course of action. Bankruptcy is obviously not in every homeowner’s best interest nor will it always save a homeowner from losing their house. Also, obviously, bankruptcy is a huge stain on one’s credit history and can significantly lower an individual’s credit score. Bankruptcy is something that will stay with a homeowner for years down the road, usually for around 10 years, so this type of action may save someone’s home but might make other areas of their financial life incredibly difficult.
Homeowners who are struggling to make their mortgage payment and may be facing foreclosure need to act early. Many advisers often tell homeowners to talk with their lenders before their first payment is missed, but even if homeowners have waited too long, there are assistance programs available to help. Home loan modifications are just one of the many mortgage aid plans that lenders are using to help homeowners stay in their home. So, before turning to bankruptcy, many financial advisers are counseling homeowners to seek out alternative routes to keeping their home so that their financial life will not take the damage that comes with bankruptcy.