While experts warn that bankruptcy should not be seen as a cure-all with the potential to completely resolve debt, filing for bankruptcy may provide homeowners with valuable aid. Florida homeowners facing foreclosure that file for bankruptcy may be able to discharge unsecured debt while forcing lenders into negotiation and obtaining much-needed time to defend against losing their properties.

Bankruptcy can be especially useful for homeowners that do not qualify for the Home Affordable Refinance Program, also known as HARP. This program allows borrowers with loans held by Freddie Mac or Fannie Mae to refinance their homes at lower rates, but borrowers who have not remained current on payments in the past six months are not eligible for enrollment. Additionally, Fannie Mae and Freddie Mac only hold about 50 percent of all mortgages.

Bankruptcy can be a powerful tool for individuals that cannot take advantage of HARP, but experts urge interested parties to consult a qualified attorney before taking action. A legal professional can help homeowners insure that they file for the correct type of bankruptcy, and avoid any dangers due to state exemptions or other stipulations specific to Florida.

Chapter 7 bankruptcy can be helpful for borrowers at risk for foreclosure, as it allows them to liquidate their assets in order to pay back a portion of their debt. This can be an effective way of delaying foreclosure action for several months, resulting in more time to seek permanent solutions. However, Chapter 7 filings are not effective when the lender holds a lien on the borrower's home, as the lender may repossess the collateral.

Alternately, Chapter 13 is a viable option for many homeowners behind on their mortgage. Chapter 13 is a reorganization of a debtor's finances. With this option debtors provide a repayment plan to creditors that occurs for as long as five years. One suggested option with a Chapter 13 bankruptcy is that a homeowner can propose to pay an additional amount each month to be applied to the arrearage.

Going through financial troubles is stressful. Thankfully, there are several options available to help individuals and families going through tough times to regain their financial dignity.

Source: NuWire Investor, "Declare Bankruptcy, Avoid Foreclosure," Phillip Van Doorn, Dec. 9, 2011