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Is your home underwater? How to truly obtain a fresh start

Over that last few years it is likely that many residents of New Jersey have found themselves making difficult decisions regarding their finances. The less than desirable economy left quite a few people in positions with their finances they never dreamed of, struggling to get by. It has led some to Chapter 7 or Chapter 13 bankruptcy filings to resolve their financial issues.

Historically there are many reasons that residents of Essex County, and beyond, have decided to file for bankruptcy including:

  • The end of a marriage
  • Debt from student loans
  • The loss of a job
  • Medical bills

With the crash of the real estate market that has plagued the economy the last few years, another group has appeared. That group consists of homeowners who are experiencing financial difficulties, are underwater on their mortgages and are unable to secure a loan modification.

According to one statistic provided by CoreLogic, nationwide, approximately 10.7 million of all homeowners were in that position at the end of the third quarter in 2012. Many of those affected are owners of homes with values of less than $200,000.

While in the past these homeowners may have turned to a Chapter 13 filing to hold onto their house, now, owners of single family homes who are behind on their mortgage may find that rather than trying to hold onto the home, the best way to address the debt mounting each month is to have it discharged in a Chapter 7 bankruptcy.

This is not to say that Chapter 13 filings are not still beneficial to some homeowners seeking to keep a house. These filings may particularly come in handy for owners of multifamily homes or non-owner occupied homes that are underwater on mortgages. For some in this situation it may be possible to complete a Chapter 13 bankruptcy, keep the house, and in the process, cram down the mortgage to what the house is actually worth.

While it is likely that few people want to turn to bankruptcy to solve their financial issues, in many cases it really is the best option. Because the best way to proceed will be dependent on the specifics of your particular situation, consulting a bankruptcy lawyer can help determine whether it is the best path for you. The start of a new year is a good time to make such a change.

Source: eCredit Daily, "Negative Equity: 22% of Residential Properties 'Underwater' at End of 3Q," Jan. 19, 2013

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Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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