Housing Recovery on the Way? If you are in debt and own a home, consider a bankruptcy to set yourself up for success

This morning the Associated Press reported two things which indicate that the housing market is strengthening.

First, foreclosure repossessions fell in February 2013 to the lowest level since September 2007. This decline is accompanied by increasing house prices and state programs to help people save their homes. The number of completed foreclosures for February 2013 was 45,038, which is 11% less than January 2013 and a whopping 29% down from February 2012. In addition, 25% fewer foreclosures were started in February 2013 than in February 2012. Second, home mortgage interest rates have ticked up for the first time in a long while, with the average 30 year rate for the US increasing from 3.52% to 3.63%.

Taken together, these two things indicate that the housing market is heading for a rebound. A rebounding housing market means that home values could increase rapidly.

If you own a home and the mortgages exceed the value of your home, then filing a bankruptcy will typically allow you to shed your unsecured debts while keeping your home. In other words, if there is no equity in the home, it will not be sold in a bankruptcy proceeding. However, if you own a home with a lot of equity, it could be sold by a Trustee in a Chapter 7 bankruptcy or you would be required to pay extra money in a Chapter 13 bankruptcy to ‘buy back’ that equity from creditors. Rising home prices mean that many people who currently have no equity and lots of debts might find themselves in a position where they suddenly have equity, which makes it more difficult to shed your debts in a bankruptcy filing.

If you own a home with little or no equity, now may be the perfect time to file a bankruptcy. A properly timed bankruptcy will allow you to wipe out your debts so that you can enjoy and take advantage of the rising values for your home.

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