[MacosNerd]

With all of the news about foreclosures and the homeowner bail out bill in congress I was wondering about bankruptcy.

I know the law had changed a few years back but wouldn't this be an option for someone who had gotten in trouble with debt and their mortgage? I thought that the personal bankruptcy laws were there (foolish notion I know) to protect the person and his/her home.

[ghporter]

If it's a mortgage issue, then changes to the bankruptcy laws shouldn't be such an issue. In general, those laws ARE to protect a person and his home, but what most people don't understand is that what you keep, you still have to pay for. That means that you actually just get some fancy debt consolidation work done by a lawyer instead of some silly company that advertises with late night infomercials.

Your first step should be to contact the lender. Tell them about the issues you're facing and ask if there's a way you can work with them to restructure your mortgage so you can still make your payments. From there you can decide what to do next.

[MacosNerd]

I'm not in trouble, I was just curious to know about this because I see the statistics about foreclosures and wonder why people cannot be protected like businesses.

If memory serves me, I believe before the rewrite of the bankruptcy law, some of the debt could be discharged, some of the assets sold but at least the house was protected.

You're right the homeowner would still be on the hook but maybe he could renegotiate the terms of the mortgage.

Lord willing, I hope I never have to cross that bridge but I see the logic in your recommendation. its better to contact the bank before things get too out of hand.

[SSharon]

I work at a law firm in NY that only does foreclosure work and from what I can tell bankruptcy only puts off the inevitable. Sure, there is an automatic stay on the house and we can't go to auction, but well over 90% of the people don't follow the reorganization plan and don't make the payments they have to in order to remain protected. It helps for a few months if you actually get your act together, but most of the people that know how to do that won't get so far in foreclosure trouble in the first place.