Facing Mountains of Debt

Individuals can find themselves in serious debt for any number of reasons. With today’s economy, the rate of unemployment, the housing market downturn, and any number of unavoidable accidents, such as natural disasters like Hurricane Sandy, major accidents, and serious illnesses, people all over the United States are facing large amounts of debt, often not due to a lack of proper financial management.

When facing unmanageable levels of debt, many people begin to worry about what the consequences could be if they can’t continue making regular payments. One major concern many people find themselves facing is the loss of their home due to being unable to make mortgage payments. While there are, unfortunately, some situations in which a person cannot prevent foreclosure on their home, the truth is that there are a number of various options for people in this situation that can help them keep their home. Whatever the circumstances were that resulted in unmanageable debt, people who are facing foreclosure may be able to use one of these many options to keep their home.

Government Programs and Aid to Prevent Foreclosure

Because of the substantial hit the housing market took in recent years, many government programs have been made available in an effort to protect and aid struggling homeowners. While there are a variety of different programs available, each tailored to meet individuals in varying situations, some of the most beneficial and most used programs include the following:

  • HAMP – the Home Affordable Modification Program is designed to support those Americans who are employed, but are struggling to make their monthly mortgage payments. Through this program, eligible home owners may be able to have their mortgage payments lowered (modified) to be more affordable in the long-term. While this program existed previously, President Obama made the group of people eligible for this program wider in June of 2012 by allowing debtors whose income to debt ratio is 31% or less, those who defaulted on their trial period payments or on their modified payments, and those who are applying for non-primary residences that they rent out or intend to rent to be eligible for applying for a mortgage modification.
  • HARP – even those who are currently able to make their mortgage payments may find themselves struggling to do so or find these payments are becoming more burdensome. In such a situation, the government has provided the HARP, Home Affordable Refinance Program, which allows those who are current on payments, but their home’s value has decreased, to refinance their mortgage into one that is more affordable and stable.
  • UP – for those that meet eligibility requirements, which includes being unemployed and unable to meet mortgage payments, the Home Affordable Unemployment Program allows them to decrease their mortgage payments to 31% of their income or stop making payments for a year or longer.

If you are not eligible for these programs, there are several other programs under the Making Home Affordable government program that could help you prevent foreclosure on your home.

Other Alternatives to Prevent Foreclosure

In addition to using the Making Home Affordable programs, there are other alternatives for homeowners who do not want to lose their homes. These include the following options:

  • Chapter 13 Bankruptcy – by filing for Chapter 13 bankruptcy with the support of a bankruptcy lawyer, a person not only receives an automatic stay, which stops creditors from seeking collection of debts including foreclosure proceedings until the bankruptcy filing is complete, but also allows a debtor to create a repayment plan for their debts that works better with their financial situation, making it easier for them to make monthly mortgage payments. Additionally, under certain circumstances, a second or third mortgage may be reclassified as unsecured debt, allowing it to be discharged at the end of the bankruptcy.
  • Truth in Lending Violation Claim – according to the Truth in Lending Act, lenders must disclose, or tell, borrowers certain information, such as the amount that will be financed, potential penalty charges, number of payments that need to be made, and other vital information. Should they fail to follow the requirements of this Act, the lender may be in violation, allowing the borrower to file a claim and stop foreclosure.
  • Bankruptcy Exemptions – Chapter 7 bankruptcy exemptions may help a debtor to protect their real property, such as a home. However, in some cases the value of a person’s mortgage may be greater than what these exemptions allow for, meaning that a person may not be able to use them to protect their home. Should the amount that is owed be less than the total amount of real property / home exemptions a debtor is allowed to claim, though, they may be able to prevent foreclosure.

Facing the prospect of foreclosure is frightening and stressful. Fortunately, you are not without options for protecting your family’s home. By exploring these and other options more thoroughly and with professional help, there is a good chance that you can take action to save your home.