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Bankruptcy

When you go through this mess, you start to look forward to the end, no matter how bad it is…you just want it to be over….
–Lauren McKenzie, Portland, Oregon


"I don't know what to do except file bankruptcy," says Lauren McKenzie of Portland, Oregon.

Caught with one of those bad mortgages, Lauren’s monthly house payment has shot up 31% (from $3,000 to $3,930) and she’s missed two payments.

“This is outrageous…I am sick to my stomach...and I have no idea what to do!” states McKenzie.

McKenzie cannot afford her out-of-friggin-control house payment.

 

Lauren's consumer credit counselor warns against filing bankruptcy, suggesting "BK" should be used as a last resort.

For Most People, Bankruptcy
Is Not The New Beginning
They Think It Will Be!

Lauren sees no alternative, and she is aware of the new bankruptcy laws (in effect October 2005).

“This seems to be the last resort for me,” Lauren admits. “The clock is ticking…they (mortgage lender) have accelerated the loan (Acceleration Clause in mortgage).”

Before filing for bankruptcy protection, she knows she must attend mandatory credit-counseling sessions held by designated groups throughout the country.

New Bankruptcy Laws Eliminate
Last Hope For Some People….

Under this new law getting your debts cancelled is more difficult! For some people, getting debts canceled will be impossible. And you can thank the credit card issuers for the more stringent laws.

For Lauren, her counselor will recommend a Chapter 13, which immediately halts a foreclosure sale and freezes all collection actions for debts that predated the bankruptcy filing.

The court then approves a repayment plan that determines which creditors get paid back and when.
Under that arrangement, she will have up to five years to pay missed mortgage payments, essentially forcing the lender into a repayment plan and forcing a time frame that most lenders would not otherwise accept.

But while trying to make good on past debt, Lauren must keep up with her regular mortgage payments and other living expenses. Can Lauren afford these increased mortgage payments?

From bad to worse, Lauren’s home probably is not worth what she paid for it…she probably owes more than it is worth. Should she continue making payments on a house she cannot afford?

These are the kind of painful decisions Lauren will need to make.

 
Objective: To present new bankruptcy laws; to share real people’s experience with bankruptcy; to discuss implications of bankruptcy on credit.
   

   
 

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