On October 17, 2005, President Bush’s radical bankruptcy reform law goes into effect, forever changing the rules of debt collection in this nation. Consumer advocates and the public appear to be completely unaware of the total and complete victory of creditors under the new legislation. This article opens the door to the Trogan Horse so consumers can prepare for the worst.

The most important aspect of the bankruptcy code was the “automatic stay” provision. This allowed consumers to file for bankruptcy at any time during the creditor’s collection process, immediately ending all creditor contact and collection activities. The new law requires a debtor to receive credit counseling from an approved nonprofit credit counseling agency for 180 days before filing for Chapter 7 or Chapter 13 bankruptcy.

While this may sound benevolent, a much closer look at the practical effect of this provision reveals the crafty dispossession of the debtor’s rights. The 180-day requirement is to give the credit counseling agency the opportunity to work out payment plans with creditors. However, during this same period of time the creditor is not prevented from carrying out collection procedures. For example, Margaret owns a home in Jacksonville, Florida and is six months behind on her mortgage. As a general rule, credit counseling agencies only work with credit card companies and have little or no training in dealing with mortgage companies.

After receiving the foreclosure documents, Margaret goes to see her lawyer to file for bankruptcy and they tell her that she should first seek credit counseling before applying for bankruptcy protection. Meanwhile, the foreclosure proceeds as planned and a sale date is set 120 days later. However, Margaret has not yet completed her 180 day requirement. What will happen to Margaret’s house? That’s how it is! The house will be sold and she cannot stop the sale by filing for bankruptcy.

This is the most radical change in debt collection in the last 50 years. Margaret’s only hope will be to work out a repayment plan or loan restructuring with her mortgage company. This is a process called loss mitigation and is explained in great detail to consumers in our new book, How to Save Your Home, ISBN # 09753754-0-7, $ 19.95, SYH University, LLC, 2005, sold at Amazon.com.

Loss Mitigation works because lenders lose an average of $ 28,000 to $ 50,000 to foreclosure nationwide. It is a myth that the lender wants your home and makes a profit from the foreclosure. A lender has to pay attorney’s fees, collection and court costs, maintain fire insurance, hire a real estate professional, repair structural and other damage to the home, and pay property taxes. . The owner can reach an agreement with the lender in more than 90% of the cases. Our company has provided housing counseling services to thousands of homeowners and the loss mitigation absolutely works.

In conclusion, it is up to the consumer to educate themselves and prepare for worst-case scenarios. Saving Your Home is an excellent training tool and will teach homeowners how to protect themselves under the new bankruptcy law. Most Americans do not have health or disability insurance and are vulnerable to job layoffs due to a stagnant economy. Who among us is immune to heart attacks, business bankruptcy, strokes, lawsuits, tax ties, or other challenges that life sometimes presents? A paycheck is literally what separates many families from the safety and despair of home and the new bankruptcy law will severely punish those who fall behind on their mortgage payments.