Bankruptcy Indiana

Major banks are finally coming to realize the importance of something I've been focused on for years – people need help to stop foreclosure, and they need it now! While it's not necessarily the best advice for every single homeowner to sacrifice everything just to stay in the home, in many cases avoiding foreclosure is crucial to a family's well-being.

Last year I, along with the Anderson, Bloomington, Indianapolis, and Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices in those cities hoped the law would change.  We wanted bankruptcy courts to be given the power to modify mortgages.  That did not happen.  It's true that current Chapter 13 bankruptcy laws in Indiana can sometimes help stop foreclosure by:
 

• discharging other debts, thus freeing up money for homeowners to get back to paying their mortgage
• getting a second mortgage discharged (not everyone can qualify for a Chapter 13 bankruptcy, though.)

The federal government has been coming out with a series of programs to help stop foreclosure, including a “short sale” foreclosure prevention plan. The latest government plan is focused  on offering incentives to lenders to “cram down” the principal balance on mortgages  This plan is meant to help

• Borrowers who owe more on their mortgage than their home is worth.  Under the plan, qualified borrowers would have their loan principal reduced.
• Borrowers who have lost their jobs would have their mortgage payments reduced for half a year, buying them time to seek new work.
  
  Two banks have made specific efforts to help homeowners:

Citigroup announced a pilot program called Foreclosure Alternatives (not yet available in Indiana). The lender, rather than evicting homeowners who fall behind on payments, take control of the property deed, yet lets the homeowner stay for up to six months, also offering help with relocation costs in case the homeowner can't recover enough to keep the home.

A more recent program is an arrangement between Bank of America and former Countrywide Financial customers who financed their homes with option ARMS and other subprime loans from Countrywide (which Bank of America took over in 2007). Loans for eligible homeowners will be modified so that payments are no more than 34% of income.

As part of offering Indiana bankruptcy information, I've used my blog to update readers and clients on all the programs that have been offered to help homeowners find help avoiding foreclosure.  The truth is, though, that none of the programs so far has helped a whole lot of people.  In fact, some harm has been done, because the drop in credit score that can result from taking advantage of one of the foreclosure help programs can become a problem in a job search.

While all this debate rages over which kind of program can best help solve homeowners' problems, I just keep offering help with mortgage modification and offering my help as a debt consolidation lawyer in Indiana.