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One in Five Homeowners Filed for Bankruptcy to Avoid Foreclosure in June

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RISMEDIA, August 5, 2009-One in five people who receives credit counseling before filing for bankruptcy cites avoiding foreclosure as the primary reason they are choosing bankruptcy, according to information collected by Consumer Credit Counseling Service (CCCS) of Greater Atlanta.

In June, the national nonprofit financial counseling agency found that 3,620 persons or 21.6% of the 16,744 people who received pre-filing bankruptcy counseling planned to file for bankruptcy to avoid foreclosure. The agency collected information about the connection between bankruptcy and foreclosure in April, May and June 2009. The decision to file for bankruptcy to avoid foreclosure appears to be a consistent trend during that period.

In May, the agency provided pre-filing bankruptcy counseling to 16,038 Americans. During that month, 3,464 persons, or 21.6% of the total, cited avoiding foreclosure as the reason to file for bankruptcy. In April, CCCS of Greater Atlanta provided pre-filing bankruptcy counseling to 17,603 individuals and 20.4% of those counseled, or 3,598 persons, stated that avoiding foreclosure was the reason for choosing bankruptcy.

Under federal bankruptcy laws, individuals who file for bankruptcy under chapter 13 are protected from foreclosure as long as they continue to make their monthly mortgage payments. Once the individual’s bankruptcy plan has been approved, they must continue making their mortgage payments to avoid the risk of foreclosure.

“Our research shows that tens of thousands of Americans are turning to bankruptcy to avoid foreclosure,” said Suzanne Boas, president of CCCS of Greater Atlanta. “We urge homeowners to call for assistance from a nonprofit counseling agency as soon as they feel they are going to have trouble meeting their mortgage payments. Free help is available from our agency and many other agencies across the country. A professional counselor can help struggling homeowners explore all options available to them and connect them with their mortgage servicer if necessary,” Boas added. “In many cases, mortgage modifications enable consumers to reduce their monthly mortgage payments.”

Any person seeking to file for bankruptcy protection is required to receive credit counseling. CCCS of Greater Atlanta provides this type of counseling and accounts for approximately 20% of all pre-filing bankruptcy counseling sessions nationally. It provided pre-filing bankruptcy counseling to more than 103,000 in the first half of 2009 and is on track to counsel more than 200,000 individuals seeking to file for bankruptcy this year.

For more information, visit www.cccsinc.org.

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