This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Going Bankrupt in 2012, but Keeping Your Home

NEW YORK ( TheStreet) -- Despite the apparent economic improvement, with the unemployment rate finally moving below 9% in November, millions will still face the possibility of losing their home through foreclosure in 2012.

While it's not a "magic bullet" that can discharge a first mortgage loan on your residence, filing for bankruptcy can buy you some time, force a mortgage lender or servicer to negotiate with you, and eliminate a significant portion of other unsecured debt, depending on your circumstances.

According to regulatory data provided by SNL Financial, the "big four" U.S. banks had huge amounts of one-to-four family residential loans on their balance sheets and serviced for others, for which the underlying homes were in the midst of the foreclosure process as of Sept. 30:
  • Bank of America (BAC - Get Report) had $23.0 billion in residential mortgage loans on its balance sheet with homes in foreclosure, while loans serviced for others in foreclosure totaled a whopping $90.6 billion.
  • for JPMorgan Chase (JPM - Get Report), residential mortgage loans in foreclosure totaled $28.9 billion, while loans serviced for others in foreclosure totaled $54.7 billion.
  • For Wells Fargo (WFC - Get Report), one-to-four family mortgage loans on the balance sheet with collateral homes in some phase of foreclosure totaled $18.1 billion, while loans serviced for others in foreclosure totaled $37.7 billion.
  • Citigroup (C - Get Report) reported $6.9 billion in residential mortgage loans in foreclosure on the balance sheet, and $10.3 billion serviced for others that were in foreclosure.

While President Obama's expansion of the Home Affordable Refinance Program , or HARP, will allow millions of borrowers with mortgage loans held by Fannie Mae (FNMA) and Freddie Mac (FMCC) to refinance their entire balances at today's low rates -- even if the borrowers owe significantly more than the homes are worth -- HARP is only available to borrowers who have been current on their loans over the past six months, and the Fannie/Freddie loans only represent about half of U.S. mortgages.

Filing for bankruptcy, of course, can't be taken lightly, and you will need the help of an attorney.

According to Geoff Walsh, a staff attorney with the National Consumer Law Center, "the first threshold question that people need to consider when they're looking at bankruptcy as an option for foreclosure is whether all of their major assets are covered by state exemption laws."

For example, in New York $100,000 in home equity is exempt if you go through bankruptcy. This means that if the difference between the market value of your home and the outstanding liens on your home is less than $100,000, you will emerge from bankruptcy still owning your home. If you have more than $100,000 in home equity, the bankruptcy trustee will sell the home, give you $100,000, and pay the rest to the mortgage lien holder.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $12.29 -5.10%
C $38.00 -4.70%
JPM $56.52 -2.10%
WFC $46.90 -2.00%
AAPL $95.24 1.30%


Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs