Residents of Arizona have not been immune from personal financial challenges caused by the struggling economy. Some have had to file for personal bankruptcy to stop foreclosure on their homes while others have participated in mortgage modification programs. Information is now coming out of foreclosure actions around the country revealing bank practices that have prevented many borrowers from taking advantage of those programs.

Even though it has been some time since the big crisis in 2008, homeowners are still suffering from the financial challenges brought on by unemployment, illness, injury or other unexpected life changes. Added to the challenges faced by some homeowners are inflated legal fees and expenses their lenders charged for unnecessary legal proceedings related to mortgage foreclosure.

In some cases, banks brought actions against second mortgage holders who, it would be discovered later, had no relationship to the mortgage or the mortgaged property. The reason for this confusion appears to be the electronic mortgage recording and transfer system used by many lenders.

The electronic recording system makes it difficult for homeowners seeking debt relief to discover the identity of the lender to whom they should speak about a modification or other assistance to stop foreclosure. Until the resolution of the current lawsuits, homeowners who need to stop foreclosure, eliminate debt or stop repossession can do so through personal bankruptcy.

Chapter 13 and Chapter 7 bankruptcy options provide benefits depending upon a person’s financial circumstances. The decision as to which type of personal bankruptcy is best suited for a person depends on many factors that may be discussed with a bankruptcy attorney before a decision is made.

Source: The New York Times, “Mortgage Registry Muddles Foreclosures,” Gretchen Morgenson, Sept. 1, 2012