Bankruptcy can help reduce the foreclosure rate

With most of the government efforts to stem forclosures having failed miserably, bankruptcy law has probably prevented a crisis on the scale of the Great Depression or worse. Congress should embrace the power of the bankruptcy law if it really wants to get a handle on the problem.

Here are some of the ways that bankruptcy can help reduce the foreclosure rate:

* Bankruptcy forces mortgage companies to the negotiating table. have you tried to re-negotiate your loan outside of bankruptcy and run in to a wall of resistance? Millions of Americans have. But the threat of a bankruptcy case makes mortgage companies at least consider alternatives to foreclosure.

* Bankrutpcy gives homeowners the time to think through their situation. Because all foreclosure proceedings are “stayed” (at least for a while) during bankruptcy, debtors can buy time to deal with the mortgage company without the fear that they will be immediately thrown on the street. This alone can help them think through their situation more clearly.

* Bankruptcy gives homeowners the chance to catch up on missed payments and bring their mortgage balance current. Outside of bankruptcy, it can be almost impossible to convince a lender to agree to reasonable terms, but through a Chapter 13 filing, homeowners can catch up on their delinquent payments over a three to five year period.

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