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Few utilize bankruptcy as a way to stop foreclosure

Many Tennesseans live in fear of losing their home, and with the sluggish economy and the financial challenges faced by many, it is understandable. The thought of foreclosure can be terrifying, leaving a family not knowing what they will do next. While this fear can be paralyzing, those with overwhelming debt and facing foreclosure should dissuade themselves from inaction.

The reasoning is simple: debtors can stop foreclosure. By filing for bankruptcy, individuals can prevent banks from engaging in a foreclosure auction. This is because bankruptcy law requires any foreclosure proceedings to be stayed once a bankruptcy petition is filed. In fact, a recent study found that those who file Chapter 7 or Chapter 13 bankruptcy were 70 percent less likely to go through foreclosure and lose their home. Chapter 13 bankruptcy was more effective because it rearranges debt into more manageable payments, allowing the debtor to get caught up on his or her mortgage payments. However, Chapter 7 bankruptcy is also a legitimate option because it allows individuals to eliminate unsecured debt, which can free up money to pay delinquent mortgage payments.

While this may sound good, the sad fact remains that only eight percent of low-income borrowers actually file for bankruptcy and stay the foreclosure process. The low number is associated with the stigma attached to bankruptcy, which has been far-reaching. However, debtors should not feel bad about filing for bankruptcy. The law is intended to allow individuals to escape overwhelming debt and give them the second chance we all deserve. Thus, those who think it may be beneficial should seriously consider bankruptcy as a real solution to reduce or eliminate debt.

Speaking with a local bankruptcy attorney is often a strong first step toward a fresh financial start. A lawyer can discuss how bankruptcy can stop creditor harassment, stay foreclosure, and provide the debt relief needed escape a scenario that may feel inescapable.

Source: Mortgageloan.com, "Study: Bankruptcy a Big Help in Saving Home from Foreclosure," Peter King, May 27, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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