Does it Make Sense to Give Up Your House in Bankruptcy?

If you're struggling with a mortgage that is too much to bear, or if you're already delinquent, then you may be considering letting it go. If you're also up to your eyeballs in debt and considering bankruptcy, then it may be a good idea to get it all done at once, and start over with a clean slate.

Before you decide which route is best, you'll want to know what options are available, and which approach may be best for your particular situation.

How Does Bankruptcy Stop Foreclosure?

Many people are aware that filing bankruptcy can stop a foreclosure, but how exactly does it work? It's important to know that if you are facing foreclosure, bankruptcy can stop it, but it's not always a permanent fix, and there are different powers in different types of bankruptcy.

First, the Automatic Stay

Your Options as a Homeowner Facing Foreclosure

With the recent turmoil in the housing and lending markets, there are a lot of people dealing with a mortgage that's not only upside-down, but with terms that simply cannot work.

Loan modification efforts have been largely ineffective as banks are just not willing to work out a plan that's reasonable. Given this problem, what can you as a homeowner do? Should you just walk away from your house? Should you fight to save your home? It all depends on the numbers and the options available.

Chapter 13 Bankruptcy and a Judges Power to Modify a Home Loan

Given the state of the housing market and home loan industry over the past few years, it's no wonder why some many people are facing foreclosure and looking to bankruptcy for help.

Historically, bankruptcy judges had the power to "cram down", or reduce the principle on all types of property EXCEPT a home.