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Bankruptcy Bankruptcy is a viable option for reducing your debt across the board, but it will not reduce your mortgage payment. So far the courts have not been given the power to make loan modifications during a bankruptcy. However, as long as you are current on your mortgage they can not take your home away just because you are going through a bankruptcy. On the other hand, if you are behind on your loan payments filing for bankruptcy will force the loan holder to stop all foreclosure activity until either the bankruptcy is discharged or they receive a "relief of stay". Obviously you need to consult a lawyer to learn more about the power and effects of a bankruptcy. The down side is the obvious damage to your credit, but if you are behind on several of your bills a bankruptcy can actually help your credit. I have one client that a few years ago had a credit score over 750. Six months ago things where so bad for him that his score fell to the low 400s. Since then he has filed bankruptcy and his creditors have started to write off the debt. Today, while he waits for the bankruptcy to be discharged his credit score has climbed to just over 500. It was a 75 point increase in his credit score while filing bankruptcy. Now that said, the final chapter of his bankruptcy story has not been written yet. We do not know for sure what will happen when the discharge is completed, but when your score is in the low 400s there isn't much that can be done to make it worse. Again, contact a lawyer about bankruptcies. Most will do a free consultation to answer your questions. |