In the Old World, including most modern European countries and England, creditors used to be put debtors in prison for failing to pay their bills. Today, failing to pay bills most likely won’t result in a prison sentence, but it can enslave you.
In Spain for instance, mortgage loans cannot be discharged in bankruptcy cases. If a man borrows money against his home and has a co-signer on the note, and if the debtor defaults on the loan, the lender can foreclose taking possession of the secured property. The debtor and co-signer will not be relieved from paying the note, including the principal, interest, penalties, and court fees.
Once the mortgage lender gets a judgment against the debtor in Spain, they can garnish wages leaving the debtor as little as $835 per month to live. By the time the lender adds all of the court costs, interest and penalties, the borrower and co-signer often owe more than the purchase price of the property and paying off the loan can take a lifetime.
The Great Recession of 2007 affected Spain just like it did the United States. An estimated 1.4 million Spaniards are facing potential foreclosure proceedings, similar to what the United States currently faces. Recent figures from the courts show that the numbers in Spain are rising fast. In 2007, there were just 26,000 foreclosures. In 2009, there were more than 93,000.
The United States, the colonist’s New World, has come a long way since the days of debtor’s prisons. Today, U.S. bankruptcy cases handle foreclosures differently than some of the countries from the Old World.
In the New World today, when it comes to secured loans, all actions to collect debts like foreclosures are automatically stopped until a bankruptcy plan or liquidation process takes place. Once an automatic stay has been applied by the bankruptcy court, the creditor must go through the bankruptcy trustee to deal with the debtor.
Depending on where you live, deficiency claims over what the house sells for can be discharged at the close of bankruptcy filings. Court costs, expenses in foreclosing, penalties, interest and any other expense for disposing of the property can also be discharged. The lender will only receive whatever money they make from the sale of the property. If the money received is more than the money owed the lender, the debtor will receive the equity, less any expenses.
Bankruptcy laws passed in the U.S. to balance the older laws favoring creditors have basically been designed to help honest debtors become productive citizens. Bankruptcy is a legal proceeding designed to protect both creditor and debtor and to allow the honest person or business to start fresh.
If you are facing foreclosure, it may be time to talk to a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan areas of Riverside or San Bernardino, California, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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