Going Bankrupt in 2012, but Keeping Your Home

But if you are having difficulty communicating with your loan servicer -- which has been a common complaint through the credit crisis, leading in part to the regulatory cease and desist orders against the largest national mortgage servicers -- Chapter 13 can lead to a court-supervised loan modification.

Another Chapter 13 advantage for borrowers facing foreclosure is that although you can't reduce the balance of a first-lien mortgage loan, if the value of the property has declined so that there's no equity left for a second lien holder, "the second mortgage is not considered secured by the home," and can be fully discharged, according to Ward.

Of course, if you are declaring bankruptcy, it is likely that you have other unsecured debt, such as credit card loans, which will also be fully discharged for a relatively small percentage of what is owed, allowing you to keep your home and emerge from bankruptcy with what Ward calls a "relatively clean slate."

Once again, don't take bankruptcy lightly, and make sure you hire a reputable attorney. The National Consumer Law Center says that consumers need to "watch out for bankruptcy-related scams," and that some people and companies "advertise help with foreclosure when all they really do is put you into bankruptcy without providing any advice on how this will help or assistance in getting through the process."

Federal law requires that consumers go through budget and credit counseling from an approved counseling agency within 180 days before you file for bankruptcy. You can find an approved counseling agency -- along with a lot of other very useful information -- at usdoj.gov/ust.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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