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Filing for Chapter 13 Bankruptcy Still Best Bet for Stopping Foreclosure

What started as a tidal wave of foreclosures is slowing to a steady stream. But that doesn’t mean the foreclosure crisis is over.

Just because fewer homes are being foreclosed upon doesn’t mean more people are paying the mortgage. It simply means that more people have already lost their homes to foreclosure – and now they’re struggling to get back on their feet.

According to a recent report by RealtyTrac, nearly half of foreclosed homes are still occupied by their former owners or renters. With nowhere to go, residents are staying in their properties payment-free – for the time being, at least.

Banks aren’t always in a rush to evict occupants, either. With many parts of the country suffering from depressed prices thanks to the foreclosure crisis, dragging their feet gives banks time to let home values rise.

But living in a former home mortgage-free isn’t all it’s cracked up to be. You may think that once a foreclosure is finalized, your emotional and financial troubles are over. On the contrary, they may have just begun.

When creditors see you’ve defaulted on your home loan, your interest rates will skyrocket to unmanageable rates - sometimes as high as 30 percent. In addition to paying more on current debts, you will likely find it difficult to get car loans or open new credit cards. Meanwhile, your foreclosure status may prevent you from getting a job, as most employers perform credit checks before hiring workers.

The only way to improve credit is to gradually redeem oneself by making regular payments on debt. But if you’re living payment-free in your old home – rather than renting a new place or taking out a mortgage – how can creditors see your progress?

And as if things aren’t tough enough already, don’t be surprised if you get a bill a few weeks after losing your house for taxes on the amount the lender wasn’t able to recoup from the sale.

Allowing your home to go into foreclosure may seem like the easy way out. But because it doesn’t address the root cause of your inability to pay the mortgage – often times, too much debt and too little home value – it creates, rather than solves, problems.

Chapter 13 bankruptcy, on the other hand, stops the foreclosure process and allows you to restructure mortgage payments and other debts so that you can actually afford to pay them going forward.

Within the next two years, it’s estimated that as many as seven million homes will fall into foreclosure. Yours doesn’t have to be one of them.

No matter how many mortgage payments you’ve missed, you don’t have to fall victim to foreclosure. Don’t let fear or embarrassment stop you from saving your most important asset. Contact DebtStoppers today to schedule a free one-on-one debt analysis with one of our bankruptcy attorneys and learn how you can stop foreclosure and save your home.

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