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Bankruptcy is still a viable option for protecting your home

Before the housing bubble burst and the recession tanked the economy, bankruptcy was often regarded negatively in Washington. However, consumers and lenders alike are adjusting to the new environment where debt and inflation have ballooned, far outpacing most people's income. Now, filing for bankruptcy can be a viable and smart decision for those who are in over their head.

Even as the housing economy has reached a more stable equilibrium, many home owners still face unforeseeable financial emergencies that make it difficult -- if not impossible -- to keep up with their mortgage payments. When consumers can no longer make the necessary payments, and what they owe far outweighs the value of the home, many choose to take advantage of a short sale. While there are both advantages and disadvantages to a short sale, if a bank refuses to take the property back or there are no buyers willing to purchase, bankruptcy can be a smarter choice.

Consumers typically have two options when it comes to bankruptcy: a Chapter 7 or Chapter 13 filing. Both of these bankruptcy types can actually help protect a person's home or personal vehicle, which can make securing a more solid financial future easier and somewhat more realistic. The decision to file either a Chapter 7 or 13 usually hinges heavily upon income and the amount of debt a person has.

Worrying about how a bankruptcy might affect a person's credit record or score is understandable. However, there is a good chance that if a person is considering filing, his or her credit might not be the strongest anyway. In some situations, bankruptcy can give Washington debtors the solid footing necessary to begin working toward a better credit score and, ultimately, a better financial future.

Source: Fox News, "Using personal bankruptcy to hit the reset button on distressed properties", Robert Massi, Aug. 27, 2015

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