Foreclosure scams can cost you your house

With the housing market turning down, more and more people are getting behind in their mortgages. This is bringing out the scam artists. These people claim they will rescue you from foreclosure, but in the end they usually cost you your house.

If you see ads for companies that promise to help you bring your mortgage up to date the best thing to do, in my opinion, is not to respond. If you are behind in your mortgage, you want to look first at negotiations with your mortgagor and then at Chapter 13 bankruptcy. More on that in a minute.

These foreclosure rescue companies usually tell you they will buy your house and rent it back to you giving you the option to buy it back in a year or two when your finances are in better order. They say they will not resell it, but they often do. They say they will not evict you for non payment of rent, but if you miss any payments they are much quicker than your bank to throw you out.

The schemes are more and more complex these days, but in the end they get the equity out of your house and you usually end up on the street. The FBI estimates that mortgage fraud led to more than $1 billion in losses in 2005, more than double the amount in 1994!

If you are behind in your mortgage, the first thing to do is talk to your bank. They hate to foreclose and if they see any chance of keeping you in your home, even at reduced interest, they will usually take it.

But if you are past that point and heading for foreclosure, call a good bankrupcty attorney immediately and ask about Chapter 13. Bankruptcy attorneys tell me that they can always stop foreclosure proceedings, even one day before they are scheduled.

Then they negotiate a deal that is much better for you than anything offered by foreclosure rescue companies. Your unsecured debt (credit cards) is usually paid back at 10 to 20 cents on the dollar and your accumulated mortgage arrears are packaged up and scheduled for payoff over time (with no additional interest or late penalties) at an amount that you can actually pay.

Do not worry about what this will do to your credit rating. No one in foreclosure or close to it has a very good credit rating. Bankruptcy may actually improve it!

For more information on bankruptcy, click here.

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