Articles -
New Bankruptcy Law Makes it
Harder to Stop Foreclosure
On October 17, 2005 President Bush’s sweeping bankruptcy reform law
goes into effect forever changing the rules of debt collection in this
natiion. Consumer advocates and the public appear to be completely
unaware of the total and complete victory of the creditors under the new
legislation. This article opens the door to the Trogan Horse so that
consumers can prepare themselves for the worse.
The most important aspect of the bankruptcy code was the “automatic
stay” provision. This allowed consumers to file for bankruptcy at
anytime during the creditor’s collection process putting an immediate
stop to all contact and collection activities from the creditor. The new
law requires that a debtor receive credit counseling from an approved
non-profit credit counseling agency for 180 days prior to filing Chapter
7 or Chapter 13 bankruptcy.
While this may sound benevolent, a much closer look at the practical
effect of this provision reveals the crafty peeling of the debtor’s
rights. The 180 day requirement is to provide the credit counseling
agency the opportunity to work out payment plans with creditors.
However, during this same period of time the creditor is not restrained
from collection efforts. For example, Margaret is a homeowner in
Jacksonville, Florida and is six months behind on her mortgage. As a
rule, credit counseling agencies only work with credit card companies
and have little or no training with dealing with mortgage companies.
After receiving foreclosure papers, Margaret goes to see her attorney
to file for bankruptcy and is told that she must first seek credit
counseling before filing for bankruptcy protection. Meanwhile, the
foreclosure proceeds on schedule and a sale date is set 120 days later.
However, Margaret still has not completed her 180 day requirement. What
will happen to Margaret’s home? That’s right! The home will be sold and
she cannot stop the sale by filing bankruptcy.
This is the most sweeping shift in debt collection in the past 50
years. Margaret’s only hope will be to work out a repayment plan or a
loan restructure with her mortgage company. This is a process called
loss mitigation and is explained in great detail to consumers in our new
book, How to Save Your Home, ISBN#09753754-0-7, $19.95, SYH University,
LLC, 2005 which is sold at Amazon.com.
Loss Mitigation works because lenders lose an average of $28,000 to
$50,000 per foreclosure nationwide. It is a myth that the lender wants
your home and makes a profit off of foreclosure. A lender has to pay
attorney fees, court and collection costs, maintain fire insurance, hire
a real estate professional, repair structural and other damage to the
home, and pay property taxes. The homeowner can work out an agreement
with the lender in over 90% of cases. Our company has provided housing
counseling service to thousands of homeowners and loss mitigation
absolutely works.
In conclusion, it is up to the consumer to educate and prepare
themselves for worse case scenarios. How to Save Your Home is an
excellent training tool and will teach homeowners how to protect
themselves under the new bankruptcy law. Most Americans do not have
health or disability insurance and are vulnerable to job layoffs because
of a stagnant economy. Who amongst us is immune to heart attacks,
business failure, strokes, law suits, tax liens or other challenges that
life sometimes presents. One pay check is literally what separates many
families from home security and despair and the new bankruptcy law will
severly punish those who slip behind on their mortgage payments.
Herbert Addison, JD, CHC is a Certified Housing
Counselor and a member of the Virginia Association of
Housing Counselors. Mr. Addison is co-author of the new
book, How to Save Your Home, and has helped thousands of
families to save their homes from foreclosure sales.
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