Foreclosure is Still a Concern for Many in Arizonia

January 15, 2013 (Press-News.org) Tough economic times have led to a rise in the number of home foreclosures in the last several years. Despite optimism for the future, a new report by the research firm RealityTrac, indicates that home foreclosure is still a serious concern for many families.

According to the report, 193,059 U.S. properties were sold in foreclosure during the third quarter, which is an increase of 21 percent from the quarter before. The report also discovered that foreclosure-related sales made up 19 percent of the total U.S. residential property sales during that period.

These numbers reflect a changing trend in recent years; the number of homes being sold in the pre-foreclosure stage has become greater than the number of homes being sold that are bank-owned and already foreclosed.

This shift may reflect consumers' beliefs that a short sale is a better alternative to a foreclosure sale. Many people feared that homeowners would be discouraged from pursuing the option of a short sale if the Mortgage Debt Relief Act expired as scheduled on January 1, 2013.

Extension of the Mortgage Debt Relief Act

The Mortgage Debt Relief Act, or MDRA, was passed in 2007 and had the effect of preventing homeowners who receive a reduction in the balance of their mortgages from incurring additional tax liability. The law applied not only to homeowners who received debt forgiveness as part of a short sale or foreclosure, but also to homeowners who receive a reduction in the balance of their mortgages through a loan modification. Without the MDRA, homeowners with underwater mortgages would potentially face tax liability for any amount of the principal balance that is forgiven by a lender.

There was significant concern that the MDRA would expire at the end of 2012. Thankfully, the act has been extended another year and homeowners can count on relief until at least January 1, 2014.

Avoiding foreclosure through bankruptcy

Homeowners who are behind on their mortgages due to debt should consider all of their available options, including filing bankruptcy. Although many people don't know it, under certain circumstances filing bankruptcy can help save their homes from possible foreclosure.

Filing for bankruptcy will typically put a halt on the foreclosure process. This can give homeowners an opportunity to catch up on mortgages that are in default.

A chapter 13 bankruptcy often allows individuals to settle their debts by making a payment plan. This payment plan is typically for a period from three to five years, and once payments have been collected, the rest of the debt is discharged. Individuals that chose this option are usually able to keep their property, such as their homes and vehicles.

When considering bankruptcy as an option, it is important to be well informed. The bankruptcy code is very complex and anyone considering filing bankruptcy can benefit from speaking with an experienced bankruptcy attorney.

Article provided by Charles M. Sabo, P.C.
Visit us at www.charlessabo.com/