Among the many financial challenges that individuals and families face, the inability to afford mortgage payments stands out as one of the leading causes of bankruptcy in the United States. Homeownership is a significant milestone for many.
However, when mortgage payments become unmanageable, it can lead to a cascading series of financial difficulties that often culminate in bankruptcy.
Debt accumulation
The struggle to meet mortgage payments often leads homeowners to accumulate additional debt to cover daily living costs or unforeseen emergencies. This can involve taking on credit card debt or personal loans or even borrowing against the home’s equity. As debt piles up, it becomes even harder to manage payments on both the mortgage and the newly acquired debts. This can push individuals and families even deeper into financial distress.
Foreclosure threats
Falling behind on mortgage payments can ultimately result in foreclosure, as lenders seek to recover their investment by repossessing the property. Foreclosure can have far-reaching consequences, forcing families out of their homes and causing severe damage to credit scores. Facing the prospect of foreclosure, some homeowners turn to bankruptcy as a means of halting the loss of their home.
According to CNBC, 45%, of consumer bankruptcies in the United States are the result of homeowners either facing foreclosure threats or not being able to afford their mortgage payments. While bankruptcy may help homeowners find relief in these areas, it does have far-reaching impacts. Thus, homeowners may want to explore other options before deciding to move forward with a bankruptcy filing.
