Subprime lenders reporting increased defaults.

The Wall Street Journal reports that subprime lenders “…the mortgage companies that cater to those with poor credit — so called subprime customers — see trouble first, and they are already warning about credit troubles.”

As they put it, “First the housing bubble deflates and then come the credit problems.”

If you are one of those facing a problem with your mortgage payments that you cannot figure out how to handle, you do not have to lose your house. Chapter 13 bankruptcy forestalls foreclosure proceedings and gives you time to work out a payment plan that you can live with.

When I mention bankruptcy to people they often say “but it will ruin my credit.” In fact, it often improves your credit because it tends to reduce your outstanding obligations and puts you on a plan that allows you to make payments on time.

You need to talk to a lawyer that specializes in bankruptcy to understand your options. It’s crazy not to do that before you let them take your house.

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