Portland Bankruptcy Law Group

It’s not a great idea to decide to make a major decision in life because “everyone’s doing it.” But that may be a good reason to look more closely at what “everyone” is doing and then decide whether doing it makes sense for you.  This is true even about something as personal as filing bankruptcy.

In 2010, more than 1.5 million bankruptcies were filed in the U.S.  That’s 9% more than in 2009. That means about 1 in every 150 people filed a bankruptcy last year.

Oregon saw an even higher increase:  about 10.2% more people filed bankruptcy in 2010 than in the previous year.

Of the states with the highest increases from the previous year, ALL of the top 6 were in western states, including whopping increases of nearly 30% in Hawaii, and close to 25% in California, Utah and Arizona.

The nationwide increase of 9% is significantly lower than the 30% annual increases for each of the previous three years.  But it still means that the total number of people filing bankruptcy is continuing to climb, although at a slower pace.

The decision whether or not to file a bankruptcy is an intensely personal choice.  It’s personal in two different ways:

• Just as every human being is different, everybody’s financial situation is a little different. Deciding whether to take a step as filing bankruptcy involves looking at your entire financial picture, and at your goals, and deciding the best way to reach your goals in your unique situation.
• Bankruptcy is personal because it is inevitably tied into feelings and ego.  These include feelings of fear, disappointment, exhaustion;  as well as those of relief, hopefulness, and appreciation.

You may well be up against many of the same forces that are encouraging or forcing so many of your neighbors to file bankruptcy.  If you are dealing with those same forces, the wise thing to do is to find out all your options, so that you can make an informed and empowered choice.

In our last blog two weeks ago we talked about major mistakes that many of the mortgage lenders made in the past few years in documenting mortgage loans and foreclosures.  These lenders cut corners and likely broke the law—sometimes in more than one way.  In some cases you may be able to leverage those mistakes into getting your home mortgage lender to give you better terms on your mortgage.  Today’s blog shows how some of the tools of bankruptcy can help you do this.

Changing the terms of a mortgage has traditionally been extremely difficult to do—in bankruptcy court or anywhere else.  Make no mistake, it still is, for a whole bunch of reasons. By way of example, even with many millions of dollars of governmental support, a series of mortgage modification programs have been duds, helping vastly less homeowners than intended.  Because of an intricate web of law and finance, mortgages have generally been a take-it-or-leave-it proposition:  either live with your mortgage terms and hang on to your home, or fail to do so and lose it.

It has taken earth-shattering events in the housing market to change this, even a little bit. Although bankruptcy is still usually not going to be a magic bullet, if used correctly, and in the right case, it may provide just enough help to save your home.  Here are some of the ways it could do so:

1. Bankruptcy buys time. Exactly how much time depends on each situation.  It stops a foreclosure, sometimes only for a few weeks, sometimes for many months or even years.  Your bankruptcy filing can buy time to finish processing a mortgage modification, which usually takes several months to complete.  And it can give you more time to sue or negotiate with your lender for better repayment terms.

2. Bankruptcy immediately eases financial pressure on you. If you need to accumulate funds to pay for an attorney to fight your mortgage lender, writing off much of your debt may be the best way to do so

3. Bankruptcy may be able to get rid of your 2^nd or 3^rd mortgage so that you can finish fighting and negotiating with your 1^st mortgage. The complications of junior mortgages often get in the way of reasonable settlements with your 1^st mortgage.  In the right circumstances a Chapter 13 case can “void” a junior mortgage, often leaving you in a much better position for suing and/or settling with your first mortgage.

4. Bankruptcy often provides a better place to fight your mortgage holder. It is a court specially designed to deal with disputes between creditors and debtors.  The bankruptcy court was early to see some of the abuses by mortgage lenders and has been in the forefront in addressing them.

5. Even if your mortgage holder was not involved in legal shenanigans, the regular bankruptcy laws give you some major advantages, even if you do not need to or decide not to sue the mortgage holder.