A news release popped up in my email this morning headlined "Bankruptcy Won't Stop Foreclosure for Troubled Borrowers".   As an attorney who does a lot of research and writing about bankruptcy law, that came as quite a surprise to me.  After all, I knew that Chapter 13 bankruptcy could provide the relief a homeowner needed to catch up past-due payments over time while making current payments.  I also knew that Chapter 7 bankruptcy, while it didn't provide a long-term solution to foreclosure, would in most cases automatically stay foreclosure proceedings temporarily, allowing the homeowner much-needed breathing room in which to assess his options.

So what might that headline mean?  Apparently, this:  "...filing for bankruptcy will not permanently stop a lender from foreclosing on a home if the borrower stops making payments."

In other words, you can't file for bankruptcy, discharge your mortgage debt, and keep your house.  I suspect that's not a big surprise to anyone, and the fact that you don't get a free house in bankruptcy is quite a bit different from the assertion that "bankruptcy won't stop foreclosure".

So why do we so often see these misleading "news" items, spreading the idea that bankruptcy isn't a viable solution for most debtors, furthering the myth that bankruptcy will "ruin your credit for ten years"?

In the case of this particular news release, it's not hard to guess at the answer.  The only person quoted in the release, and the contact for further information about the release, is Patrick McGilvray of The Home Buying Center, LLC.  A quick glance at  The Home Buying Center's website reveals images strikingly similar to those corrugated plastic signs you see in depressed neighborhoods offering to pay cash for your home fast.  The message in this release seems to be, "Bankruptcy won't save your home, so instead you should avoid foreclosure by quickly selling it to us."

In other news items, the connection may be more subtle.  The banking and consumer credit industry has a powerful lobby and a massive public relations machine at their disposal.  And bankruptcy isn't the right answer for everyone, nor something that should be entered into without research, professional advice, and an understanding of the options.

But when direct misinformation like, "bankruptcy won't stop foreclosure" and "you won't be able to get credit for ten years after you file bankruptcy" is part of the "news", question the credibility of the source and seek out the unbiased facts.