In addition, most Americans are burdened with some form of debt: student loans, mortgage payments, car payments. The combination of debts and a sudden loss of income can quickly spiral out of control. Sometimes the best way to recover from out-of-control debt is to file for bankruptcy. Bankruptcy isn’t the end of the world, and in fact helps many Americans turn their lives around. The US bankruptcy code was put in place to you get back on your feet.

However, because the economy and financial world are constantly becoming more complex, the government has had to make the bankruptcy code more and more detailed. Consequently it can be very difficult to understand the bankruptcy code and where you fit into it.

The bankruptcy code, part of the much larger body of laws called the United State Code, is divided into a series of chapters. These may have a familiar ring: you may have heard of a company filing for Chapter 11 bankruptcy, for example. Chapter 11 is almost always used by corporations and provides mechanisms for the business to reorganize itself and its debts.

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The plan is called Home Affordable Modification Program-or HAMP.  This home retention plan is paid for by the federal government-your tax dollars-so do not hesitate to take advantage of this helping hand.  Over 5 million homeowners are expected to benefit under this $75 billion government program.  Here’s the basics of the plan:

1. All homeowners who ask for consideration must be reviewed for eligibility-even if they have been turned down previously
2. Borrowers must show evidence of a financial hardship or the imminent risk of default
3. Lenders must follow a standard formula to determine if a borrower meets the federal qualification guidelines-reducing the interest rate to as low as 2%
4. Homeowners who meet the basic guidelines will be asked to submit a loan modification application, including a financial statement and proof of income

The banks are motivated to modify as many loans as possible for a couple of reasons.  The lenders will be paid by the Treasury Department for each loan they modify using the standard federal terms.  Also, President Obama has strongly encouraged all banks to reach out to homeowners to offer this plan-whether they are behind on their payments or not.  If a financial hardship exists, then a homeowner is encouraged to begin the application process.

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President Obama’s plan is an effort to to help the struggling homeowner who has so far been able to make the monthly payment, but do to circumstances beyond their control would soon face the lost of their home.

The two major mortgage holders Fannie Mae and Freddie Mac, will be held to using guidelines set in effect by the government, concerning loans they either own or guarantee. This plan offers a reward to the companies who work within the guidelines and help homeowners refinance their houses. The Government will help differ the cost of the extra paper work by offering the servicer a fee of $1000 for each eligible loan modification. With an other fee of $1000 each year up to 3 years for successful loan modification.

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Considering the old rules, one could make a choice of bankruptcy type that is most suitable for him/her. But, according to the new rule, those who wish to file for bankruptcy can be restricted based on the income levels and those with higher income levels can’t simply file for bankruptcy under any personal bankruptcy chapter of their choice.

The modify bankruptcy laws state that initially, the current monthly income of the person will be compared with the average income of a person of the same state. If it is found that the current income of the person is equal to or less than the average income, then one can file for bankruptcy, but, on the other hand, if the income level of the person is found to be higher than the average income in the respective state, then he/she may be restricted from filing a case for bankruptcy.

The actual aim of the government to enforce the bankruptcy laws is to find out if a person has more than sufficient income after spending on definite expenses and making needful payments, and stop such individuals from simply filing for bankruptcy despite generating a decent level of income. One can also test his/her candidature privately by cutting off some debit payments and allowed expenses from his/her present monthly income. If the total income left after this calculation is less than average level income in the state, then he/she can file for bankruptcy without any problems.

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These federal programs apply only to mortgage loans on primary dwellings that are held or backed by Fannie Mae and Freddie Mac. The lenders must also be on a list approved by the Treasury Department.

There are two different types of help available under Obama’s Home Stimulus Plan and each one has a different set of application guidelines:

· Refinance: This option helps homeowners who previously could not refinance an unreasonable and unsuitable mortgage. Economic conditions had created a situation where they actually owed more than the current market value of the home. This option provides refinancing for folks who owe no more than 105% of the value and have not been more than 30 days late on a payment in the last year.

· Home Loan Modification: This option is a totally reworked loan for homeowners who are falling behind in their payments due to financial hardship beyond their control. These loans have to have a current payment that is more than 31% of the borrower’s gross monthly income, have been originally written prior to January 1, 2009, and not have a loan amount over $729,750.

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Restriction on eligibility: Not everyone qualifies for bankruptcy now. Earlier individuals who filed for bankruptcy could choose the one Chapter that would be best for them. However, according to the new law, individuals with high income are not allowed to file Chapter 7. Instead they have to file Chapter 13 and repay at least part of the debt.

Debt counseling: Under the new bankruptcy law, any individual (you) wanting to file bankruptcy must, at first, have completed credit counseling with an agency that is approved by the United States Trustee’s Office. This counseling will finalize whether you need to file bankruptcy or can get other repayment options open for you.

More expensive Lawyers: As a result of the new bankruptcy laws, lawyers and attorneys are finding it difficult to represent clients in court. On top of that it is time consuming too and hence law firms are charging more money from clients. So, it has made lawyers more expensive. Since the new law imposes that the lawyers must vouch for the accuracy of the information provided by their clients, it means that attorneys have to spend more time on research. Hence, they are charging their clients a greater amount as fees than they earlier did.

Allowed expenses: The new law also suggests that any one filing bankruptcy has to live on less than they are used to. Not only will they have to hand over their disposable income but this disposable income will also be dictated by the IRS.

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First time homeowners who have been waiting for the bottom are now shopping. Some communities are reporting actual shortages of homes at the entry level. In Sacramento, an area with a lot of foreclosures, homes under $200,000 are getting multiple offers – almost like the ‘good old days’. Many of those homes were selling for $280,000 or more at the peak of the market, and $200,000 may be painful, but at least they are selling!

Internationally, the IMF (International Monetary Fund) is predicting a worldwide growth of over 2% in 2010, a figure that they have just recently increased since their last estimate in April.

So, with pundits now doing revisions UPWARDS in their predictions, instead of down, we can say that the end (of the recession) is near. Just as the start date of the recession was early in 2008 – long before anyone noticed it had arrived – the end date of the recession will not be known until long after it has departed.

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President Barack Obama’s multimillion dollar economic stimulus package includes a special section devoted to easing the woes of homeowners and restoring the housing market. For homeowners needing relief from heavy mortgages the home stimulus package provides a variety of options to alleviate the suffering. One option would result in a homeowner’s mortgage being reduced to about 30% of their income. This reduction would ultimately keep a significant amount of money in a homeowner’s pockets. Another option available under the home stimulus package is allowing lenders to reduce a homeowner’s total mortgage amount or principal to decrease payments and stave off foreclosure. The final option of the home stimulus package is directed towards reviving the housing market.

First time home buyers will qualify for a tax credit of up to $8000. So if you are looking for a chance to grab the American dream now is a perfect time to do it. The only stipulations are you must be a first time home buyer and the property you are purchasing must be your primary residence. In addition, you must not make more than $75,000 as a single person or $150,000 as a married couple in order to qualify for the $8000 tax credit. With a deal like this it is with great hope that many people will become homeowners.

The idea behind the recent bankruptcy law was to limit the abuse of the system. The new statute is supposed to help determine whether people really need to declare chapter 7, even though many lawyers and consumers disagree. Regardless of what you think about this new statute, you have to get used to it (at least until you convince your congressman to change it).

So what does the new bankruptcy law mean to you? For one thing, you’ll be required to attend credit counseling classes within 180 days before filing personal bankruptcy. You may be able to do this online or over the phone instead of attending a live class. You’ll have to produce a certificate that proves your attendance, but you may be able to get an extension from the court if you were not able to take it before filing a petition.

You have to make your tax return available to any creditor who asks for it, and you also have to get your pay stubs together for the last 60 days before you filed Chapter 7. After your successful Chapter 7 case, you’ll also have to attend the financial management class to help ensure that you do not repeat your mistakes and end up in bankruptcy court sometime in the future.

Will you still be eligible for Chapter 7? Well, one lawyer estimates that only 3% or so of people that would have been eligible previously will no longer be able to file Chapter 7. In other words, most people will still be eligible, even though they may have to go through additional hurdles.

Specifically, if your salary is greater than the median salary for your state, you will have to take a more involved test to determine whether you can afford to pay some of your debt. If you fail this test, you may be forced to declare Chapter 13 which involves a partial repayment plan.

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275 billion dollars has been earmarked to stimulate the housing market and stop the increasing number of foreclosures by helping homeowners obtain lower monthly payments and stay in their homes.

How will this be done? House payments (counting insurance, taxes, and homeowner’s dues) will be adjusted to no more than 31% of a homeowner’s gross monthly income through loan modifications.

This will be done using any or all of the following tools until the desired payment is achieved:

• A lower interest rate, possibly as low as 2%.
• Extension of the length of the loan to as long as 40 years.
• Waiver of late fees
• Reduction of principal

You must qualify in order to apply. The following guidelines will help you determine if you might be able to obtain fast help through Obama’s Home Stimulus Package:

• Your home must be your primary residence, where you live more than half of the time.
• The original loan has to be dated on or before January 1, 2009.
• The loan amount has to be no more than $729,250.
• Your payment, including taxes, insurance, and any homeowners association dues, must be more than 31% of your total gross monthly income.
• You must be in a state of financial hardship. This means that your mortgage payment is either in arrears or will soon be due to events beyond your control. This could include: job loss, death of a spouse, medical bills, or an adjustable rate mortgage that jumped way above what you expected. You must be able to document this situation and also present how your income could reliably sustain the new, modified house payment.

The stimulus package loan modifications are only available for a limited window of time, and if you are facing foreclosure, you definitely need to act quickly.

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