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Illinois Man: Should I Walk Away From My Home Or Declare Bankruptcy?

With high rates of job loss and underwater mortgages, it is no surprise that millions of middle class American families are stuck between a rock and a hard place when it comes to making difficult financial decisions. This week, The Wall Street Journal answered a letter from an Illinois man struggling to decide between walking away from their home and declaring Chapter 7 bankruptcy.

The family has two mortgages – both with adjustable-rates that readjust in the spring of next year. They know that they will not be able to make the new payments, but are unsure how to extract themselves from the situation. On one hand, the family could allow their house to go into foreclosure while paying off other debts. On the other hand, they could try to declare bankruptcy and get a new start altogether.

The Wall Street Journal columnist responded to the problem with a plan – though, unfortunately, none of the options are easy ones. He suggested that the family should first check and see if they qualify for help from the government’s Making Home Affordable Program. Next, they should talk to a specialized bankruptcy lawyer about their bankruptcy options in Illinois – noting that Chapter 7 bankruptcy is probably the easiest way to clear their debts and move forward. Finally, the expert suggested looking into a Chapter 13 bankruptcy that could provide them with a sustainable debt repayment plan.

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