Crosby Finance

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 situations.

The “automatic stay” provision, an important part of the new legislation allows consumers to apply for bankruptcy to stop all collection procedures and even, contact from the creditor. The same can be filed anytime by the creditor. For chapter 7/chapter 13 bankruptcy applications, the debtor should have been receiving counseling for 180 days to manage credit from a non-profit agency for credit counseling approved by the government.

The provision’s practical effect harms the debtors as during the 180 day counsel period, though the debtor is trying to solve payment problems with creditors, yet the law allows the creditor to collect payments. Under situations where the foreclosure date is within the 180 days period, the only option for the owner is to restructure the mortgage plan with her company and can be studied under the topic “loss mitigation”.

The lender wants you to retain your house because for every foreclosure, the lender loses USD $ 28k-50k as he needs to pay the attorney, pay for fire insurance, hire real estate services, repair the house, pay taxes etc. That’s the reason loss mitigation works. The success rate for negotiations with the lender is around 90% and this proves that loss mitigation works well for the debtors.

The information is very crucial for every American as one delayed paycheck might cost one one’s house. In a country like America, where health problems are not a surprise for many, a late paycheck is of high probability.