How the new bankruptcy laws will affect foreclosures
In October 2005, President Bush's government changed the way debts were collected by making changes to the bankruptcy laws. The new law gives the creditors the upper hand. The consumers are quickly getting stuck in bad situations that keep getting worse.
An important part of the new law is the "automatic stay" provision, which lets people file for bankruptcy to stop all collection actions and even contact from creditors. The same thing can be filed by the creditor at any time. For Chapter 7 and Chapter 13 bankruptcies, the debtor should have been working with a government-approved, non-profit credit counselling agency for 180 days to learn how to handle their debt.
In practise, this part of the law hurts debtors because during the 180-day counselling period, when the debtor is trying to work out payment issues with creditors, the law still lets creditors collect payments. When the date of foreclosure is within 180 days, the owner's only choice is to restructure the mortgage plan with her company. This is called "loss mitigation," and you can learn more about it here.
The lender wants you to keep your house because every time he has to foreclose, he loses between $28,000 and $50,000 because he has to pay an attorney, buy fire insurance, hire real estate services, fix the house, pay taxes, and so on. This is why loss prevention works. Around 90% of negotiations with the lender are successful, which shows that loss mitigation works well for the people who owe money.
There are books on the market that can help people be ready for these kinds of situations.
"How to Save Your Home" is an example of one of these books. It would help someone avoid the new bankruptcy law. The information is very important for every American to know, because one missed paycheck could cost someone their home. In a country like America, where many people have health problems all the time, it's likely that a paycheck will be late.
