As I mentioned on Monday, there are currently about 11 million homeowners who are “underwater” on their mortgages. These families not only owe more than their homes are worth, but many have incurred additional expenses or suffered losses of income. Last December, the Associated Press reported that with living costs on the rise, a record number of Americans—nearly 1 in 2—have fallen into poverty, with almost half of Americans being poor or low-income.
In addition to mortgage payments, too many people are struggling to keep up with the burden of excess credit card debt, student loan payments or medical bills. Chapter 7 bankruptcy can provide much-needed relief for these homeowners—if they act before it is too late.
The stigma that frowns upon those who are “strategically defaulting” these days much resembles the long-held stigma that can often prevent many people from filing bankruptcy. However, with the slow pace of economic recovery, this causes many homeowners to take actions that will only make life more difficult. Some people will dig into 401ks or IRAs—retirement assets that would otherwise be exempt from bankruptcy—in order to pay bills, but this not only can incur taxes and penalties, such withdrawals are also viewed as income by the bankruptcy court. As a result, the actions can actually end up preventing the homeowners from qualifying for Chapter 7 relief.
If every month finds you and your family struggling just to get by, Chapter 7 can provide an invaluable opportunity to gain control of your finances again. On Friday, I will further explain the immediate benefits of filing Chapter 7.