One in Five Homeowners Filed for Bankruptcy to Avoid Foreclosure in June
RISMEDIA, August 5, 2009-One in five people who receives credit counseling before filing for bankruptcy cites avoiding foreclosure as the primary reason they are choosing bankruptcy, according to information collected by Consumer Credit Counseling Service (CCCS) of Greater Atlanta.
In June, the national nonprofit financial counseling agency found that 3,620 persons or 21.6% of the 16,744 people who received pre-filing bankruptcy counseling planned to file for bankruptcy to avoid foreclosure. The agency collected information about the connection between bankruptcy and foreclosure in April, May and June 2009. The decision to file for bankruptcy to avoid foreclosure appears to be a consistent trend during that period.
In May, the agency provided pre-filing bankruptcy counseling to 16,038 Americans. During that month, 3,464 persons, or 21.6% of the total, cited avoiding foreclosure as the reason to file for bankruptcy. In April, CCCS of Greater Atlanta provided pre-filing bankruptcy counseling to 17,603 individuals and 20.4% of those counseled, or 3,598 persons, stated that avoiding foreclosure was the reason for choosing bankruptcy.
Under federal bankruptcy laws, individuals who file for bankruptcy under chapter 13 are protected from foreclosure as long as they continue to make their monthly mortgage payments. Once the individual’s bankruptcy plan has been approved, they must continue making their mortgage payments to avoid the risk of foreclosure.