By John Clark
If you're trying to fix your finances or save your home, you're probably feeling overwhelmed or scared.
That's perfectly normal. And with the stigma attached to filing bankruptcy, it's no wonder.
But-as you already know-the truth about bankruptcy is that it's not just for people who can't control their spending habits.
Filing bankruptcy is sometimes necessary and the only option to save your house.
For those facing foreclosure, reoganization bankruptcy can be useful.
Because of the automatic stay feature of Chapter 13, collectors are prohibited from collecting any debts, which includes home mortgage payments and the home itself. But, because of the new bankruptcy laws enacted in October, 2005, some potential foreclosure victims are unable to file for bankruptcy in time.
The law requires that all those who file for Chapter 13 bankruptcy first complete a credit counseling course, which is fine for those with an orderly foreclosure and debt schedule, but can present a problem for the rest of us. The case of the Sosa family in December, 2005 exhibited just what was wrong with the credit counseling requirement.
The Sosas, who were consulting with their mortgage company to figure out exactly how much money they owed on their home, were hoping to be able to pay once they found out the amount.
When they attempted to pay at the last minute, though, their lien holder refused to accept payment. Rather than lose their home to foreclosure, the Sosas decided on filing bankruptcy.
But the court could not accept their petition.
The judge, who slammed the strictness of the law in his decision, said that his "hands were tied."
Though he believed the family should have been able to file an emergency petition, he was unable to grant them Chapter 13 bankruptcy protection because they had not had time to complete the credit counseling requirement.
The law currently has no provisions for emergency cases like the Sosas'-everyone who wishes to file for Chapter 13 bankruptcy must complete the credit counseling course. But that could be about to change.
Two weeks ago, the House's Committee on Commercial and Administrative Law approved a bill that would amend current U.S. Bankruptcy code to allow debtors in danger of losing their homes (like the Sosas) to waive the credit counseling requirement.
If it passes, the bill will require filers to show proof that foreclosure proceedings have begun on their home in lieu of proof of completion of the credit counseling course. In addition, the bill (known as HR 3609) will allow for a lengthened allowable repayment period for any debt secured by the filer's primary residence.
Since most people don't have a pre-planned timetable for the foreclosure of their homes, this bill could mean great things.
To track the progress of HR 3609, continue to visit the Total Bankruptcy website. For more information about preventing foreclosure with Chapter 13 bankruptcy or refinancing, click the links provided.
If Chapter 13 bankruptcy isn't for you, then you may want to read more Chapter 7 bankruptcy and how it works to eliminate debt.