Effect Of New Bankruptcy Laws on Foreclosure

The bankruptcy reforms introduced by President Bush's government in October 2005 changed the debt collection system in the country. The new legislation makes the creditors victors. The consumers are quickly being in the quicksand from bad to worse conditions.

The automatic stay provision, an important part of the new legislation allows consumers to apply for a bankruptcy to end all collection processes and even, contact from the creditor.  The same could be filed anytime by the creditor.  For chapter 7 or chapter 13 bankruptcy applications, the debtor must have been obtaining counseling for a period of 180 days to manage credit from a non-profit agency for credit counseling that is approved by the government. 

The provision's convenient cause hurts the debtors as during the 180 day counsel period, although the debtor is attempting to resolve payment problems with creditors, yet the law will allow the creditor to put together payments.  Under certain circumstances where the foreclosure date is within the 180 days period, the only alternative for the owner is to restructure the mortgage plan with his/her company and can be studied under the topic of loss mitigation. 

The lender wants you to retain your house since for every foreclosure, the lender loses anywhere from $28,000 to $50,000 as they will need to pay the attorney, pay for fire insurance, hire real estate services, repair the house, pay taxes and so on.  This is the reason why loss mitigation works.  The success rate for negotiations with the lender is roughly 90% and this proves that loss mitigation works well for the debtors. 

There are books available in the market to help the consumer be prepared for these type of scenarios. 

An instance of one such book is How to Save Your Home, which may help one to shield oneself from the effect of new bankruptcy law.  The information is really crucial for every American as one delayed paycheck may cost one one's house.  In a country like America, where health problems are not a surprise for many people, a late paycheck is of high probability.