Bankruptcy and Foreclosure Details for the Homeowner

There are a lot of good folks in Michigan contemplating the foreclosure and/or bankruptcy dilemma due to the terrible economy in the state. The loss of jobs has caused the increased use of credit cards to pay mortgage payments and other monthly bills. House payments are increasing and employment is decreasing. Top all that off with decreased wages across the entire state and the ugly picture becomes quite clear.

The once frightening option of foreclosure due to the inability to make payments now becomes a viable option. Consideration of bankruptcy to get out from under the mass of high interest credit card bills is now a feasible choice. Housing values have pretty much dropped to half of what the mortgage values are now, so selling an underwater house for a profit is nearly impossible. Paying on a $200,000 mortgage for a house that is valued for much less is depressing to say the least and probably fiscally irresponsible as well. For quite some time now people have been aware that there is no other way out, and are utilizing the the foreclosure and bankruptcy systems to walk away from their house and their overdue bills.

First off, you need to understand that even when you quit making house payments you can likely stay in your house free for about one year. Foreclosure proceedings will not even begin until you are 90 days late with your payment. Then you simply tell them you are filing for bankruptcy protection, and all the bank actions will get put on hold. The house auction will be delayed the minute you retain an attorney. The court procedure takes two to three months to complete, and this occurs while you are still living in the house without making payments. Then you will be given another automatic 6 month redemption period to stay in the home, once your filing is complete, and still you have no payments. Only after your redemption period is over can the bank resume the eviction procedure. The average time to stay in your house is about one year after you made your last payment.

If you plan on filing bankruptcy and letting your mortgage holder take the house back you should prepare about six months in advance. Get all your finances out of the bank and into cash or into a family members account. Liquidate whatever possessions that you have decided upon, and do the same thing with any proceeds. If you are going to get cash from your credit cards this will need to be done at least 6 months before you file for bankruptcy, or you will still be responsible for payment. You need to have as little cash as possible in your name when you file, and you should not leave a recent paper trail. You can bankrupt out of all your bills except student loans and back income taxes owed. Property taxes on your dwelling will be bankrupted along with your house. Phone bills, cable, bank loans, credit cards, and all the rest will be removed from your liability.

If you are going to lose everything anyway because of a job loss or serious wage cut, you should definitely prepare yourself the best you can. Do the necessary research to see if you qualify for Chapter 7 bankruptcy. Shop around for a good attorney, as this is required by law. Ask your counsel all the questions you may have. He will guide you through everything, each step of the way. Talk to someone that has been through the procedure, and get their thoughts also. A fresh start, baggage and debt free may be just what turns your life around.

Best of luck to you, and thanks for reading.