Bad Financial News Abounds, Bankruptcy May Help
Bad economic news abounds these days. The financial markets in New York are in crisis. Lending sources are drying up. Foreclosure rates are higher than any time since the Great Depression. More and more consumers and businesses are seeking bankruptcy protection in federal courts as they struggle to make payments on the record amount of debt that has been run up in the United States.
The financial crisis unfolding on Wall Street and in Washington D.C. has many people nervous about their futures. If you are facing a financial crisis, the government may not be there to bail you out. Consult an experienced bankruptcy attorney and weigh your options for becoming debt free.
Government agencies are offering lifelines to financial institutions that gambled on risky mortgage loans made during the run up in housing prices. Since the housing bubble burst, homeowners have found themselves in homes that are worth less than they owe on the mortgage in some cases. Some help has been extended to homeowners, but Washington is offering billions of taxpayer dollars to save companies that took bad risks that have left some Americans with no equity in their homes and few options for the spiraling consumer debt they are facing.
According to a report issued by the Federal Reserve Bank in September, consumer debt in the U.S. was over $2.5 trillion, up from just over $2 trillion five years ago.
Unsecured debt accounts for almost 970 billion of outstanding consumer debt as of July, according to the report.
With unemployment on the rise, banks and financial behemoths being taken over by the federal government and foreclosure rates across the country still rising, your financial situation may seem as precarious as those Wall Street firms that you keep reading about. Bankruptcy protection under Chapter 7 or Chapter 13 may be the only hope you have to get out of debt.
Filing Chapter 7 bankruptcy can wipe out most unsecured debt. Chapter 13 bankruptcy can protect your home from foreclosure and restructure your debt under terms that make it easier on you.
President George W. Bush and his administration have sought to calm consumers and markets concerned about the nation’s unstable financial system. The Treasury Department seized control of the largest mortgage finance companies, Fannnie Mae and Freddie Mac, in early September. The Federal Reserve Board authorized its New York bank to provide an $85 billion two-year revolving credit line to insurance giant AIG. In exchange, the government will get an 80 percent stake in the company if they default on the taxpayer backed loan.
In describing the moves that his administration is making to halt the financial crisis; the President said “Significant amounts of taxpayer dollars are on the line.” Even so, he added, “We expect this money will eventually be paid back.”
The Bush administration is working with the Democratic-controlled Congress on a proposal to set up a federal agency to absorb bad debts currently held by U.S. banks.
Similar to the Resolution Trust Corporation started in 1989 by his father’s administration to stem losses in the savings and loan industry, the current Bush administration’s plan to use a similar program to purchase risky mortgage-backed securities held by the country’s financial institutions and free up capital for the stagnant economy.
If this occurs, Democrats in Congress suggest that more help will be available for Americans struggling to keep homes that are worth less than they owe. Until then, you should do everything you can to keep your home. Contact a qualified bankruptcy attorney today.
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