For many Americans, Marylanders included, buying a home is a dream come true. The dream can turn nightmarish, though, when foreclosure threatens to leave a buyer with nothing except unpaid debt. Fortunately, with the right guidance from an experienced professional, foreclosure can be avoided.
According to a recent study by the Center for Community Capital at the University of North Carolina, declaring bankruptcy is an effective way to prevent the sale of property through a foreclosure auction. The study found that lower-income borrowers who filed for bankruptcy under Chapters 7 or 13 of the U.S. bankruptcy code were 70% more likely to keep their homes than people who did not file for bankruptcy once foreclosure proceedings began. The study looked at 4,300 borrowers with low incomes who were behind on mortgage payments by 90 or more days from 2003 to 2012.
Both Chapters 7 and 13 bankruptcy filings stop foreclosure proceeding on property, although the latter is almost five times more effective than Chapter 7, according to the authors. Chapter 13 bankruptcy resolves outstanding mortgage balances by restructuring and repaying.
On the other hand, a Chapter 7 bankruptcy filing can relieve a debtor of unsecured debt, freeing up money to pay the mortgage. Despite the advantages offered by both chapters under the bankruptcy code, only 8% of those eligible actually filed for bankruptcy after a foreclosure proceeding started. One reason for this, the authors say, is the social stigma that is attached to a bankruptcy filing.
Any person in Maryland, who faces a foreclosure, should find out what methods are available to stop foreclosure proceedings. Bankruptcy will certainly be one of them. If the situation permits, a home can also be refinanced. The best course of action may be to consult with a qualified Washington DC nonprofit bankruptcy attorney.
Source: MortgageLoan.com, “Study: Bankruptcy a Big Help in Saving Home from Foreclosure,” Peter King, May 27, 2014